Impaired fracture healing in patients with obesity-associated type 2 diabetes (T2D) is a significant unmet clinical problem that affects millions of people worldwide. However, the underlying causes are poorly understood. Additionally, limited clinical information is available on how pre-diabetic hyperglycemia in obese individuals impacts bone healing. Here, we use the diet-induced obesity (DIO) mouse (C57BL/6J) model to study the impact of obesity-associated pre-diabetic hyperglycemia on bone healing and fibrillar collagen organization as healing proceeds from one phase to another. We show that DIO mice exhibit defective healing characterized by reduced bone mineral density, bone volume, and bone volume density. Differences in the healing pattern between lean and DIO mice occur early in the healing process as evidenced by faster resorption of the fibrocartilaginous callus in DIO mice. However, the major differences between lean and DIO mice occur during the later phases of endochondral ossification and bone remodeling. Comprehensive analyses of fibrillar collagen microstructure and expression pattern during these phases, using a set of complementary techniques that include histomorphometry, immunofluorescence staining, and second harmonic generation microscopy, demonstrate significant defects in DIO mice. Defects include strikingly sparse and disorganized collagen fibers, as well as pathological accumulation of unfolded collagen triple helices. We also demonstrate that DIO-associated changes in fibrillar collagen structure are attributable, at least in part, to the accumulation of advanced glycation end products, which increase the collagen-fiber crosslink density. These major changes impair fibrillar collagens functions, culminating in defective callus mineralization, remodeling, and strength. Our data extend the understanding of mechanisms by which obesity and its associated hyperglycemia impair fracture healing and underline defective fibrillar collagen microstructure as a novel and important contributor.