Increased vascular permeability and blood flow alterations are characteristic features of diabetic retinal microangiopathy. The present study investigated vascular endothelial growth factor (VEGF) and its interactions with endothelin (ET) 1 and 3, endothelial, and inducible nitric oxide synthase (eNOS, iNOS) in mediating diabetes induced retinal vascular dysfunction. Male Sprague Dawley rats with streptozotocin (STZ) induced diabetes, with or without VEGF receptor signal inhibitor SU5416 treatment (high or low dose) were investigated after 4 weeks of follow-up. Colour Doppler ultrasound of the ophthalmic/central retinal artery, retinal tissue analysis with competitive RT-PCR and microvascular permeability were studied. Diabetes caused increased microvascular permeability along with increased VEGF mRNA expression. Increased vascular permeability was prevented by SU5416 treatment. Diabetic animals showed higher resistivity index (RI), indicative of vasoconstriction with increased ET-1 and ET-3 mRNA expression, whereas eNOS and iNOS mRNA expressions were un-affected. SU5416 treatment corrected increased RI via increased iNOS in spite of increased ET-1, ET-3 and VEGF mRNA expression. Cell culture (HUVEC) studies indicate that in part, an SU5416 induced iNOS upregulation may be mediated though a MAP kinase signalling pathway. The present data suggest VEGF is important in mediating both vasoconstriction and permeability in the retina in early diabetes.