Mitochondrial dysfunction is considered to play an important role in the development of diabetic retinopathy. Recent evidence has also shown many similarities between diabetic retinopathy and a low grade chronic inflammatory disease. The aim of this study is to understand the interrelationship between proinflammtory mediator, IL-1β and mitochondrial dysfunction in the accelerated loss of capillary cells in the retina. Using IL-1β receptor gene knockout (IL-1R1(-)/(-)) diabetic mice, we have investigated the effect of regulation of IL-1β on mitochondrial dysfunction and mtDNA damage, and increased retinal capillary cell apoptosis and the development of retinopathy. Retinal mitochondrial dysfunction and mtDNA damage were significantly ameliorated in IL-1R1(-)/(-) mice, diabetic for ~10 months, compared to the wild-type diabetic mice. This was accompanied by protection of accelerated capillary cell apoptosis and the development of acellular capillaries, histopathology associated with diabetic retinopathy. Thus, mitochondrial damage could be one of the key events via which increased inflammation contributes to the activation of the apoptotic machinery resulting in the development of diabetic retinopathy, and the possible mechanism via which inflammation contributes to the development of diabetic retinopathy includes continuous fueling of the vicious cycle of mitochondrial damage, which could be disrupted by inhibitors of inflammatory mediators.