Diabetic macular oedema (DMO) is an important cause of vision loss in patients with diabetes mellitus. The underlying mechanisms of DMO, on both macrocellular and microcellular levels, are discussed in this review. The pathophysiology of DMO can be described as a process whereby hyperglycaemia leads to overlapping and inter-related pathways that play a role not only in the initial vascular events, but also in the continued tissue insult that leads to chronic DMO. On a macrocellular level, DMO is believed to be in part caused by alterations in hydrostatic pressure, oxygen tension, oncotic pressure and shear stress. Three key components of the microvascular pathways include angiogenic factor expression, inflammation and oxidative stress. These molecular mediators, acting in conjunction with macrocellular factors, which are all stimulated in part by the hyperglycaemia and hypoxia, can have a direct endothelial effect leading to hyperpermeability, disruption of vascular endothelial cell junctions, and leukostasis. The interactions, signalling events and feedback loops between the various molecules are complicated and are not completely understood. However, by attempting to understand the pathways involved in DMO, we can help guide new treatment options targeted towards specific factors or mediators.