To assess whether functional (electrophysiological) parameters are related to changes in the structural (microvascular) parameters in diabetic retina. Methods: This prospective cohort study included 380 eyes of patients with diabetes mellitus (DM) and 160 eyes of healthy controls. We analysed the electroretinogram (ERG) parameters and vascular parameters acquired from optical coherence tomography (OCT) angiography according to the diabetic retinopathy (DR) severity from early to late stages of DR. Results: After exclusion, 366 eyes of diabetes and 157 eyes of controls were included in the analysis. The mean age at enrolment was 65.4 AE 7.8 years, and 177 (33.84%) were male. The amplitude and implicit time of the rod and cone and combined response ERG b-wave were significantly reduced and prolonged in the eyes of patients with DM, compared to the controls. There was a positive correlation between the amplitude and vessel density (VD) of the superficial plexus and a negative correlation between the implicit time and superficial VD in the scotopic and combined response b-wave. Interestingly, there was no correlation between electrophysiological parameters and deep VD. These correlations between electrophysiological parameters and vascular parameters were not significant in the non-diabetic, healthy control group. Conclusions: Functional and structural impairments precede the clinical manifestation of DR. We also found that these neural impairments, evaluated by ERG, were correlated with superficial VD. However, this correlation was absent in the healthy and early DR groups. These findings carefully suggest that neuronal dysfunction is linked to vascular dysfunction in type 2 diabetes.