Retinal microvascular cell loss plays a critical role in the pathogenesis of diabetic retinopathy. To examine this further, type 1 streptozotocin-induced diabetic rats and type 2 Zucker diabetic fatty rats were treated by intravitreal injection of the tumor necrosis factor-specific inhibitor pegsunercept, and the impact was measured by analysis of retinal trypsin digests. For type 2 diabetic rats, the number of endothelial cells and pericytes positive for diabetes-enhanced activated caspase-3 decreased by 81% and 86%, respectively, when treated with pegsunercept (P < 0.05). Similarly, the number of diabetes-enhanced terminal deoxynucleotidyl transferase-mediated dUTP nick-end labeling-positive endothelial cells and pericytes decreased by 81% and 67% respectively when treated with pegsunercept (P < 0.05). Diabetes-increased activated caspase-3- and terminal deoxynucleotidyl transferase-mediated dUTP nick-end labeling-positive microvascular cell numbers were both reduced by 81% and 80%, respectively, in pegsunercept-treated type 1 diabetic rats (P < 0.05). Inhibition of tumor necrosis factor reduced type 1 diabetes-enhanced pericyte ghost formation by 87% and the number of type 2 diabetes-enhanced pericyte ghosts by 62% (P < 0.05). Similarly, increased acellular capillary formation caused by type 1 and type 2 diabetes was reduced by 68% and 67%, respectively, when treated with pegsunercept (P < 0.05). These results demonstrate a previously unrecognized role of tumor necrosis factor-alpha in promoting the early pathogenesis of diabetic retinopathy leading to loss of retinal microvascular cells and demonstrate the potential therapeutic benefit of modulating its activity.