Diabetic retinopathy (DR) is the most common complication of diabetes mellitus (DM). It has long been recognized as a microvascular disease. The diagnosis of DR relies on the detection of microvascular lesions. The treatment of DR remains challenging. The advent of anti-vascular endothelial growth factor (VEGF) therapy demonstrated remarkable clinical benefits in DR patients; however, the majority of patients failed to achieve clinically-significant visual improvement. Therefore, there is an urgent need for the development of new treatments. Laboratory and clinical evidence showed that in addition to microvascular changes, inflammation and retinal neurodegeneration may contribute to diabetic retinal damage in the early stages of DR. Further investigation of the underlying molecular mechanisms may provide targets for the development of new early interventions. Here, we present a review of the current understanding and new insights into pathophysiology in DR, as well as clinical treatments for DR patients. Recent laboratory findings and related clinical trials are also reviewed.