Diabetic retinopathy is the most disabling complication of diabetes, affecting 65% of patients after 10 years of the disease. Current treatment options for diabetic retinopathy are highly invasive and fall short of complete amelioration of the disease. Understanding the pathogenesis of diabetic retinopathy is critical to the development of more effective treatment options. Diabetic hyperglycemia and dyslipidemia are the main metabolic insults that affect retinal degeneration in diabetes. Although the role of hyperglycemia in inducing diabetic retinopathy has been studied in detail, much less attention has been paid to dyslipidemia. Recent clinical studies have demonstrated a strong association between dyslipidemia and development of diabetic retinopathy, highlighting the importance of understanding the exact changes in retinal lipid metabolism in diabetes. This review describes what is known on the role of dyslipidemia in the development of diabetic retinopathy, with a focus on retinal-specific lipid metabolism and its dysregulation in diabetes.