1. The present review reports some of the earliest physiological changes that occur in the diabetic retina prior to any clinical or anatomical changes in an animal model of diabetes. 2. Using chemically induced diabetes (by streptozotocin) in rats, retinal blood flow and vitreal and retinal oxygen tension were determined after 5 weeks of sustained hyperglycaemia. Blood flow was greater and was also redistributed in the diabetic group compared with values for the control group. At the same time, oxygen tension distribution was altered around retinal arterioles, implying an increase in retinal oxygen consumption in these early diabetic retinas. 3. The possibility that the blood flow changes could be due to altered control mechanisms in the retinal vasculature was confirmed using an isolated, perfused eye preparation. In diabetic eyes an altered reactivity to test pharmacological agents was demonstrated after 4 weeks of diabetes. 4. To further explore these vascular response changes we developed an isolated, perfused retinal arteriolar preparation in which individual segments of the vasculature can be tested. The possibility that insulin has a direct vasodilator effect on retinal arterioles was confirmed and was demonstrated to act via nitric oxide released from the vascular endothelial cells. These data may implicate the diabetic-induced insulin changes in early retinal changes. 5. Evidence is presented that although early glucose control may be vital in stopping the onset of diabetic retinopathy, there comes a stage in the induced diabetic cascade where if the retinopathy has commenced, good glucose control cannot stop the further progression of the retinopathy.