Diabetic retinopathy (DR), a major microvascular complication of diabetes, leads to retinal vascular leakage, neuronal dysfunction, and apoptosis within the retina. In this study, we combined STZ with whole-body hypoxia (10% O2) for quicker induction of early-stage retinopathy in C57BL/6 mice. We also compared the effects of a high glucose condition combined with hypoxia (1% O2) to a low glucose condition by using retinal pigment epithelial (RPE) cells, which are a crucial component of the outer blood-retinal barrier and the damage is related to retinopathy. In the retina of DM/hypoxic C57BL/6 mice, abnormal a-wave and b-wave activity, yellowish-white spots, hyperfluorescence, and reduced retinal thickness were found using electroretinography (ERG), fundus photography (FP), fundus fluorescein angiography (FFA), and optical coherence tomography (OCT). Shikonin dose-dependently (0.5-50 mg/kg, per os) prevented DM/hypoxia-induced lesions. In eye tissue, administration of shikonin also attenuated DM/hypoxia-induced pre-apoptotic protein BAX expression as well as the production of inflammatory proteins cyclooxygenase-2 (COX-2) and inducible nitric oxide synthase (iNOS). We also demonstrated that shikonin administration rescues high glucose/hypoxia (1% O2)-induced inflammation, decreased junction protein expression, and permeability in RPE cells. These results indicate that shikonin treatment may prevent the loss of vision associated with DR.