Aims/hypothesis Diabetic retinopathy, the leading cause of blindness in working-age Americans, is characterised by reduced neurotrophic support and increased proinflammatory cytokines, resulting in neurotoxicity and vascular permeability. We sought to elucidate how oxidative stress impairs homeostasis of nerve growth factor (NGF) and its precursor, proform of NGF (proNGF), to cause neurovascular dysfunction in the eye of diabetic patients. Methods Levels of NGF and proNGF were examined in samples from human patients, from retinal Müller glial cell line culture cells and from streptozotocin-induced diabetic animals treated with and without atorvastatin (10 mg/kg daily, per os) or 5,10,15,20-tetrakis (4-sulfonatophenyl) porphyrinato iron (III) chloride (FeTPPs) (15 mg/kg daily, i.p.) for 4 weeks. Neuronal death and vascular permeability were assessed by TUNEL and extravasation of BSA-fluorescein. Results Diabetes-induced peroxynitrite formation impaired production and activity of matrix metalloproteinase-7 (MMP-7), which cleaves proNGF extracellularly, leading to accumulation of proNGF and reducing NGF in samples from diabetic retinopathy patients and experimental models. Treatment of diabetic animals with atorvastatin exerted similar protective effects that blocked peroxynitrite using FeTPPs, restoring activity of MMP-7 and hence the balance between proNGF and NGF. These effects were associated with preservation of blood-retinal barrier integrity, preventing neuronal cell death and blocking activation of RhoA and p38 mitogen-activated protein kinase (p38MAPK) in experimental and human samples. Conclusions/interpretation Oxidative stress plays an unrecognised role in causing accumulation of proNGF, which can activate a common pathway, RhoA/p38MAPK, to mediate neurovascular injury. Oral statin therapy shows promise for treatment of diabetic retinopathy.