Diabetic retinopathy (DR) is a common complication of diabetes and a leading cause of legal blindness in working-age adults. The clinical hallmarks of DR include increased vascular permeability, leading to edema, and endothelial cell proliferation. Much of the research effort has been focused on vascular changes, but it is becoming apparent that other degenerative changes occur beyond the vascular cells of the retina. These include increased apoptosis, glial cell reactivity, microglial activation, and altered glutamate metabolism. When occurring together, these changes may be considered as neurodegenerative and could explain some of the functional deficits in vision that begin soon after the onset of diabetes. This review will present the current evidence that neurodegeneration of the retina is a critical component of DR. There are two basic hypotheses that account for loss of cells in the neural retina. First, the loss of blood-retinal barrier integrity, which initially manifests as an increase in vascular permeability, causes a failure to control the composition of the extracellular fluid in the retina, which in turn leads to edema and neuronal cell loss. Alternatively, diabetes has a direct effect on metabolism within the neural retina, leading to an increase in apoptosis, which in turn causes breakdown of the blood-retinal barrier. It is not clear which hypothesis will be found to be correct, and, in fact, it is likely that vascular permeability and neuronal apoptosis are closely linked components of DR. However, the gradual loss of neurons suggests that progress of the disease is ultimately irreversible, since these cells cannot usually be replaced. In light of this possibility, new treatments for DR should be preventive in nature, being implemented before overt clinical symptoms develop. While vascular permeability is the target that is primarily considered for new treatments of DR, evidence presented here suggests that apoptosis of neurons is also an essential target for pharmacological studies. The vision of people with diabetes will be protected only when we have discovered a means to prevent the gradual but constant loss of neurons within the inner retina.