Incipient diabetic retinopathy is characterized by increased vascular permeability and progressive vascular occlusion. Pericyte loss precedes capillary occlusion in the diabetic retina, but its cause remains unclear. One concept proposes that pericyte loss is the result of toxic product accumulation and induction of destructive cellular signals generated within the pericyte. Alternatively, new experimental data indicate that pericyte dropout may result from regulations which induce pericyte elimination as an active process. Pericytes are critical for the development of a proper retinal network, and appear protective for endothelial cells under hyperglycemic conditions. The unifying hypothesis of hyperglycemia-induced microvascular damage centers around hyperglycemia-induced mitochondrial overproduction of reactive oxygen species. The pharmacological prevention of acellular capillaries without the rescue of pericyte loss in experimental diabetic retinopathy suggests that the endothelium is the primary therapeutic target.