Angiostatin is a potent angiogenic inhibitor. The present study identified a new activity of angiostatin: reducing vascular leakage, which is associated with diabetic macular edema, tumor growth and inflammation. An intravitreal injection of angiostatin significantly reduced retinal vascular permeability in rats with oxygen-induced retinopathy and in those with streptozotocin-induced diabetes, but not in normal rats. Consistent with its effect on permeability, angiostatin downregulated vascular endothelial growth factor (VEGF) expression in the retina in both the rat models but not in normal controls. These results suggest that the effect of angiostatin on vascular leakage is mediated, at least in part, through blockade of VEGF overexpression.