Diabetes Mellitus (DM) is a complex metabolic disorder associated with multiple microvascular complications leading to nephropathy, retinopathy, and neuropathy. Mounting evidence suggests that red blood cell (RBC) alterations are both a cause and consequence of disturbances related to DM-associated complications. Importantly, a significant proportion of DM patients develop varying degrees of anemia of confounding etiology, leading to increased morbidity. In chronic hyperglycemia, RBCs display morphological, enzymatic, and biophysical changes, which in turn prime them for swift phagocytic clearance from circulation. A multitude of endogenous factors, such as oxidative and dicarbonyl stress, uremic toxins, extracellular hypertonicity, sorbitol accumulation, and deranged nitric oxide metabolism, have been implicated in pathological RBC changes in DM. This review collates clinical laboratory findings of changes in hematology indices in DM patients and discusses recent reports on the putative mechanisms underpinning shortened RBC survival and disturbed cell membrane architecture within the diabetic milieu. Specifically, RBC cell death signaling, RBC metabolism, procoagulant RBC phenotype, RBC-triggered endothelial cell dysfunction, and changes in RBC deformability and aggregation in the context of DM are discussed. Understanding the mechanisms of RBC alterations in DM provides valuable insights into the clinical significance of the crosstalk between RBCs and microangiopathy in DM.