Protease-activated receptor-2 (PAR2) is expressed in endothelial cells and mediates endothelium-dependent vasodilation. We hypothesized that PAR2 regulates tumor necrosis factor-alpha (TNF-α)-induced coronary arteriolar dysfunction in type 2 diabetic (db/db) mice. To test this, coronary arterioles from WT control, db/db, db/db mice treated with PAR2 antagonist FSLLRY–NH₂ (db/db+FSLLRY–NH₂) and db/db mice null for TNF (db^TNF−/db^TNF−) were isolated and pressurized (60 cmH₂O) without flow. Although vasodilation to the endothelium-independent vasodilator sodium nitroprusside (SNP) was not different among WT, db/db, db/db+FSLLRY–NH₂ and db^TNF−/db^TNF−, endothelium-dependent acetylcholine (ACh)- and flow-mediated vasodilation were impaired in db/db mice but were enhanced in db^TNF−/db^TNF− mice and db/db mice treated with PAR2 antagonist. NOS inhibitor N ^G-nitro-l-arginine-methyl ester (l-NAME) significantly reduced ACh-induced dilation in WT, db^TNF−/db^TNF− and db/db+FSLLRY–NH₂, but did not alter the vasodilation in db/db mice. In contrast, cyclooxygenase (COX) inhibitor indomethacin (Indo) did not alter ACh-induced vasodilation in these four groups of mice. PAR2-activating peptide (PAR2-AP, 2-Furoyl-LIGRLO-am)-induced dilation was higher in db/db mice than that in WT, db^TNF−/db^TNF− and db/db mice treated with PAR2 antagonist. These effects were abolished by denudation, or in the presence of l-NAME or Indo. Protein expressions of TNF-α, PAR2, gp91^phox and p47^phox in the heart and isolated coronary arterioles were higher in db/db mice compared to WT mice. Administration of PAR2 antagonist to db/db mice reduced protein expression of TNF-α, gp91^phox and PAR2. Protein expression of gp91^phox and p47^phox was lower in db^TNF−/db^TNF− compared to db/db mice. These results indicate that PAR2 plays a pivotal role in endothelial dysfunction in type 2 diabetes by up-regulating the expression/production of TNF-α and activating NAD(P)H oxidase subunit p47^phox.