Proliferative diabetic retinopathy (PDR) is the most severe vision-threatening complication of diabetes. For investigation of genetic association between TCF7L2 and PDR in Caucasian type 2 diabetes mellitus (T2DM) and its functional consequences, 383 T2DM patients with PDR (T2DM-PDR) and 756 T2DM patients without diabetic retinopathy (T2DM-no DR) were genotyped with rs7903146 in TCF7L2. We found that risk allele (T) frequency of rs7903146 was significantly higher in T2DM-PDR patients (allelic P = 2.52E-04). In lymphoblastoid cells induced to undergo endoplasmic reticulum (ER) stress by treatment of tunicamycin, higher fold change of TCF7L2 and VEGFA mRNA levels were observed in rs7903146-TT cells than in rs7903146-CC cells (P = 0.02 for TCF7L2; P = 0.004 for VEGFA), suggesting that ER stress plays a role in PDR pathogenesis. Silencing TCF7L2 resulted in decreased mRNA levels of both TCF7L2 and VEGFA (P < 0.001). Retinas of oxygen-induced retinopathy mice (a model for PDR) had higher TCF7L2 and VEGFA mRNA levels than those of controls (P = 2.9E-04 for TCF7L2; P = 1.9E-07 for VEGFA). Together, data from our study show that TCF7L2-rs7903146 is associated with PDR in Caucasian T2DM and suggest that TCF7L2 promotes pathological retinal neovascularization via ER stress-dependent upregulation of VEGFA.