Diabetic retinopathy (DR) is a major cause of blindness in Europe and North America, and the incidence is expected to increase in parallel with the rising incidence of diabetes mellitus. This article reviews the current state of knowledge of the epidemiology, clinical presentation and pathophysiology of DR and its principal associated complications, diabetic macular oedema (DME) and neovascularization, and then proceeds to the primary focus of clinical management. A series of major randomized controlled trials conducted over the past few decades has confirmed that tight glycaemic regulation is the most effective measure to reduce the risk of developing DR and to minimize the likelihood of its progression, and that control of blood pressure is also an important feature of preventive management. Laser-based therapies remain the cornerstone of treatment, with panretinal photocoagulation indicated for proliferative and severe nonproliferative DR and focal photocoagulation indicated for treatment of DME. For patients who do not benefit from these approaches, vitrectomy may provide therapeutic benefits. Medical therapies include two broad classes of agents: anti-inflammatory drugs and agents with molecular targets. The utility of oral anti-inflammatory drugs remains to be established, as dose-finding studies have yet to provide definitive conclusions. Intravitreal corticosteroids may be of value in specific circumstances, although adverse effects include cataract progression and elevated intraocular pressure. However, these complications appear to have been limited with new extended-release technologies. With respect to molecular targets, evidence has been adduced for the roles of vascular endothelial growth factor (VEGF), tumour necrosis factor (TNF)-α and protein kinase C (PKC)-β2 in the pathogenesis of DR, and agents targeting these factors are under intense investigation. The role of VEGF in mediating pathological angiogenesis and vascular hyperpermeability has been best defined. Preliminary efficacy of pegaptanib and ranibizumab in the treatment of DME is being confirmed in additional clinical trials with these agents and with the off-label use of bevacizumab, another monoclonal antibody related to ranibizumab. Moreover, other agents targeting VEGF, as well as drugs directed against TNFα and PKC-β2, are under study. Evaluation of the ultimate utility of these approaches will await the efficacy and safety results of properly designed phase III trials.