Maternal diabetes is a significant risk factor for structural birth defects, including congenital heart defects and neural tube defects (NTDs). With the rising prevalence of type 2 diabetes and obesity in women of childbearing age, diabetes-induced birth defects have become an increasingly significant public health problem. Maternal diabetes in vivo and high glucose in vitro induce yolk sac injuries by damaging the morphology of cells and altering the dynamics of organelles. The yolk sac vascular system is the first system to develop during embryogenesis, therefore, it is the most sensitive to hyperglycemia. The consequences of yolk sac injuries include impairment of nutrient transportation due to vasculopathy. Although the functional relationship between yolk sac vasculopathy and structural birth defects has not yet been established, a recent study reveals that the quality of yolk sac vasculature is inversely related to embryonic malformation rates. Studies in animal models have uncovered key molecular intermediates of diabetic yolk sac vasculopathy, including hypoxia-inducible factor-1α (HIF-1α), apoptosis signal-regulating kinase 1 (ASK1) and its inhibitor thioredoxin-1 (Trx), c-Jun-N-terminal kinases (JNK), nitric oxide (NO) and nitric oxide synthase (NOS). Yolk sac vasculopathy is also associated with abnormalities in arachidonic acid and myo-inositol. Dietary supplementation with fatty acids that restore lipid levels in the yolk sac lead to reduction in diabetes-induced malformations. Although the role of the human yolk in embryogenesis is less extensive than in rodents, nevertheless, human embryonic vasculogenesis is negatively affected by maternal diabetes. Mechanistic studies have identified potential therapeutic targets for future intervention against yolk sac vasculopathy, birth defects, and other complications associated with diabetic pregnancies.