Two independent clinical studies have reported that fenofibrate, a peroxisome proliferator-activated receptor α (PPARα) agonist, has robust therapeutic effects on microvascular complications of diabetes, including diabetic retinopathy (DR) in type 2 diabetic patients. However, the expression and function of PPARα in the retina are unclear. Here, we demonstrated that PPARα is expressed in multiple cell types in the retina. In both type 1 and type 2 diabetes models, expression of PPARα, but not PPARβ/δ or PPARγ, was significantly down-regulated in the retina. Furthermore, high-glucose medium was sufficient to down-regulate PPARα expression in cultured retinal cells. To further investigate the role of PPARα in DR, diabetes was induced in PPARα knockout (KO) mice and wild-type (WT) mice. Diabetic PPARα KO mice developed more severe DR, as shown by retinal vascular leakage, leukostasis, pericyte loss, capillary degeneration, and over-expression of inflammatory factors, compared with diabetic WT mice. In addition, overexpression of PPARα in the retina of diabetic rats significantly alleviated diabetes-induced retinal vascular leakage and retinal inflammation. Furthermore, PPARα overexpression inhibited endothelial cell migration and proliferation. These findings revealed that diabetes-induced down-regulation of PPARα plays an important role in DR. Up-regulation or activation of PPARα may represent a novel therapeutic strategy for DR.