Diabetic retinopathy is the leading cause of blindness in the working population. We now understand that the pathogenesis of the disease contains both a neurodegenerative and vasodegenerative component. Yet despite this, current treatment is still limited to combating the proliferative end stage component of the disease rather than addressing its underlying causes. In recent years, much basic research has focused on demonstrating the potential that several classes of stem cells have in conferring both neuro- and vasoprotection on the diabetic retina. Further, progress has been made in using stem cells to stimulate both neuro and vascular regeneration. This review will discuss the current understanding as to what mechanisms underlie diabetic retinopathy while highlighting the types of stem cells which offer hope as potential novel therapies for diabetic retinopathy, including those that are now in clinical trial.