This study was undertaken to further characterise the fine structural changes occurring in the retinal circulation in early diabetes. The eyes of eight alloxan/streptozotocin and three spontaneously diabetic dogs were examined by trypsin digest and electron microscopy after durations of diabetes of between 1 and 7 years. Basement membrane (BM) thickening in the retinal capillaries was the only obvious fine structural change identified during the first 3 years of diabetes and was established within 1 year of induction. Widespread pericyte loss was noted after 4 years of diabetes and was paralleled by loss of smooth muscle (SM) cells, in the retinal arterioles. SM cell loss was most obvious in the smaller arterioles of the central retina. No microaneurysms were noted in the experimental diabetic dogs with up to 5 years' duration of diabetes but were widespread in a spontaneously diabetic animal at 7 years. This study has shown that SM cell loss, a hitherto unrecognised feature of diabetic microangiopathy, accompanies pericyte loss in the retinal circulation of diabetic dogs.