Diabetic retinopathy (DR), the most common microvascular complication that occurs in diabetes mellitus (DM), is the leading cause of vision loss in working-age adults. The prevalence of diabetic retinopathy is approximately 30% of the diabetic population and untreated DR can eventually cause blindness. For decades, diabetic retinopathy was considered a microvascular complication and clinically staged by its vascular manifestations. In recent years, emerging evidence has shown that diabetic retinopathy causes early neuronal dysfunction and neurodegeneration that may precede vascular pathology and affect retinal neurons as well as glial cells. This knowledge leads to new therapeutic strategies aiming to prevent dysfunction of retinal neurons at the early stage of DR. Early detection and timely treatment to protect retinal neurons are critical to preventing visual loss in DR. This review provides an overview of DR and the structural and functional changes associated with DR, and discusses neuronal degeneration during diabetic retinopathy, the mechanisms underlying retinal neurodegeneration and microvascular complications, and perspectives on current and future clinic therapies.