Diabetic retinopathy (DR) is a well-recognized microvascular complication of diabetes. Growing evidence suggests that in addition to retinal vascular damage, there is significant damage to retinal neural tissue in DR. Studies reveal neuronal damage before clinically evident vascular lesions and DR is now classified as a neuro-vascular complication. Hyperglycemia causes retinal damage through complex metabolic pathways leading to oxidative stress, inflammation, vascular damage, capillary ischemia and retinal tissue hypoxia. Retinal hypoxia is further worsened by high oxygen consumption in the rods. Persistent hypoxia results in increases in vascular endothelial growth factor (VEGF) and other pro-angiogenic factors leading to proliferative DR/macular edema and progressive visual impairment. Optimal glucose control has favorable effects in DR. Other treatments for DR include laser photocoagulation, which improves retinal oxygenation by destroying the high oxygen consuming rods and their replacement by low oxygen consuming glial tissue. Hypoxia is a potent stimulator of VEGF, and intra-vitreal anti-VEGF antibodies are effective in regressing macular edema and in some studies, retinal neovascularization. In this review, we highlight the complex pathophysiology of DR with a focus on retinal oxygen/fuel consumption and hypoxic damage to retinal neurons. We discuss potential mechanisms through which SGLT2-inhibitors improve retinal hypoxia – through ketone bodies which are energetically as efficient as glucose and yield more ATP per molecule of oxygen consumed than fat, along with less oxidative stress. Retinal benefits would occur through improved fuel energetics, less hypoxia and through the anti-inflammatory/oxidative stress effects of ketone bodies. Well-designed studies are needed to explore this hypothesis.