Diabetes aggravates the impact of elevated BP (blood pressure) on the microcirculation, and people of African ancestry with diabetes are more susceptible to microvascular damage than Europeans. In the present study, we investigated possible differences in the retinal microcirculation in people of European and African-Caribbean ethnicity with diabetes that might account for this. A total of 51 subjects with Type 2 diabetes (age 40–65 years; 25 male; 29 African-Caribbean) were studied. Clinic and 24 h ambulatory BP, and fasting glucose, insulin and lipids were measured. Digital retinal images were analysed using custom-written semi-automatic software to determine: LDR (length/diameter ratio) and AVR (arteriolar/venular diameter ratio), branching angles, vessel tortuosity and NT (number of terminal vessel branches). Arterioles were narrower in European people with diabetes than in African-Caribbean people with diabetes [mean (S.D.) arteriolar diameter, 76 (7) compared with 82 (11) μm respectively (P=0.03); arteriolar LDR, 28.1 (8.5) compared with 23.7 (7.0) respectively (P=0.046); and AVR, 0.66 (0.21) compared with 0.90 (0.36) respectively (P=0.028)]. Ethnic differences in arteriolar LDR, arteriolar diameter and AVR were not explained by differences in BP, but were attenuated by adjustment for the duration of diabetes. There was no significant relationship between BP and arteriolar narrowing in the group as a whole, although the relationship between arteriolar LDR and systolic BP was stronger in Europeans than African-Caribbeans [β=0.08 (0.07) compared with β=0.03 (0.06); P=0.03]. In conclusion, in the presence of diabetes, a relationship between BP and retinal arteriolar diameter was not evident and implies impaired small artery remodelling in the presence of diabetes. African-Caribbean people with diabetes have wider retinal arterioles and this could contribute to enhanced microvascular damage in this ethnic group.