Dogs were made alloxan-diabetic and randomly distributed into either of two prospective treatment groups. In one group it was intended that the metabolic signs of diabetes be controlled poorly, and commercial insulin was administered in doses inadequate to prevent chronic, severe hyperglycemia and glucosuria. In the other group it was intended that the metabolic disorder be well controlled, and the animals received food and commercial insulin twice daily such that the hyperglycemia and glucosuria became mild or infrequent. Experimental improvement of the carbohydrate disorder was accompanied by amelioration of hyperlipemia and other clinical signs of deficient insulin activity. By 60 months of diabetes, retinal capillary aneurysms, pericyte ghosts, obliterated vessels, and other microvascular abnormalities typical of diabetes were apparent in each animal of the poor-control group. Better control was found to reduce significantly the incidence and severity of microvascular lesions. The data suggest that the mechanism responsible for diabetic retinopathy is initiated as a result of deficient insulin activity and that the development of the microvascular complications of diabetes are preventable and may be inhibited by careful control of the metabolic disorder.