Background: Erectile dysfunction is a major complication of diabetes mellitus. Adipose derived stem cells (ADSCs) has attracted much attention as a promising tool for the treatment of diabetes mellitus induced erectile dysfunction (DMED). Inducible nitric oxide synthase (iNOS) plays an important role in protecting penile tissues from fibrosis. The aim of this study was to determine the efficacy of ADSCs overexpressing iNOS on DMED in rats. Methods: ADSCs were isolated and infected with adenovirus overexpressing iNOS (named as ADSCs-iNOS). The expression of iNOS was detected using western blot analysis and real-time PCR. Rats were randomly assigned into five groups: control group, DMED group, ADSCs group, ADSCs-EGFP group and ADSCs-iNOS group. 5×105 cells were given once via the intracorporal route. Two weeks after treatment, erectile function was assessed by electrical stimulation of the cavernous nerve. Penile tissues were obtained and evaluated at histology level. Results: We found that ADSCs-iNOS had significantly higher expression of iNOS at mRNA and protein levels and generated more nitric oxide. ADSCs-iNOS reduced collagen I and collagen IV expression of corpus cavernosum smooth muscle cells (CCSMCs) in cell co-culture model. Transforming growth factor-β1 expression and p-Smad2/3 to Smad2/3 ratio in CCSMCs reduced following co-culture with ADSCs-iNOS. Injection of ADSCs-iNOS significantly ameliorated DMED in rats and decreased collagen/smooth muscle cell ratio of penile tissues. Moreover, elevated nitric oxide and cGMP concentrations were detected in penile tissues of ADSCs-iNOS group. Conclusion: Taken together, ADSCs-iNOS significantly improve erectile function of DMED rats. The therapeutic effect may be achieved by increased nitric oxide generation and the suppression of collagen I and collagen IV expression in the CCSMCs to decrease penile fibrosis. © 2019 PeerJ Inc.. All rights reserved.