Diabetic retinopathy is subdivided into two forms: non-proliferative diabetic retinopathy (NPDR) and a more severe form, proliferative diabetic retinopathy (PDR).

NPDR starts with damage to the retinal blood vessels from prolonged elevation of blood glucose. The blood vessels develop tiny weak areas called microaneurysms. Over time, these microaneurysms can rupture nd leak. This can result in retinal bleeding, or hemorrhage. Fluid from the blood stream can also leak into the retina and cause swelling, a condition called macular edema. Fats and proteins from the blood stream may leak into the retina as well, and are referred to as hard exudates. Macular edema tends to cause central blurring of vision and/or distortion. Over time, poor blood supply can result in death of nerve cells responsible for fine vision (a process called macular ischemia); this can lead to a permanent central blind spot with corresponding untreatable decreased central vision.

After prolonged poor blood flow, the retina produces substances that promote the growth of new, abnormal blood vessels (a process called retinal neovascularization). Retinal neovascularization marks the shift from non-proliferative to proliferative diabetic retinopathy (PDR) and is a very serious condition. This development of new blood vessels may appear logical, as the old, original blood vessels are often permanently damaged and poorly functioning. However, the retinal neovascularization process tends to do more harm than good over the long-term. The new blood vessels are fragile and tend to bleed into the vitreous cavity, a condition termed vitreous hemorrhage. A vitreous hemorrhage can cause significant floaters in the vision (from floating blood cells) and may cause transient near-total blindness if the hemorrhage is particularly dense. The new blood vessels may also grow along the surface of the retina, scar, and contract; this can pull on the retina and cause a very serious condition called traction retinal detachment.