Diabetic retinopathy results from a combination of systemic and ocular abnormalities. Vasodilation, basement membrane pathology, microaneurysms, abnormal blood flow and tissue oxygenation, connective tissue abnormalities, and retinal ischemia are all components of early diabetic retinopathy. The pathogenesis of neovascularization is discussed with respect to the effects of vasodilation, vascular leakage, vitreous changes, and retinal ischemia. The evidence supporting Michaelson's hypothesis that a chemical messenger from the retina provides the stimulus for neovascularization is cited. The sequence of events involved in angiogenesis are cellular and basement membrane changes, endothelial cell migration, endothelial cell proliferation, and vessel formation. The experimental evidence in support of a role for retina-derived growth factor as a mediator of these cellular events is reviewed.