Diabetic retinopathy is the major cause of new cases of blindness among working-age Americans. The authors analyzed the medical and economic implications of alternative screening strategies for detecting retinopathy in a diabetic population. The approaches compared included dilated fundus examination at 6-, 12-, and 24-month intervals with and without fundus photography. Potential savings from screening and treatment are based on amounts paid by the federal government for blindness-related disability. Screening for and treating retinopathy in patients with type I diabetes mellitus was cost-effective using all screening strategies. Between 71,474 and 85,315 person years of sight and 76,886 and 94,705 person years of reading vision can be saved for each annual cohort of patients with type I diabetes mellitus when proper laser photocoagulation is administered. This results in a cost savings of $62.1 to $108.6 million. Annual examination of all diabetic patients and semi-annual examination of those with retinopathy was more effective than annual examination with fundus photography. This screening strategy is consistent with the Preferred Practice Pattern for Diabetic Retinopathy of the American Academy of Ophthalmology.