Insulin resistance and chronic inflammation are key elements in the pathogenesis of type 2 diabetes. We hypothesized that similar mechanisms could have a role in the development of diabetic retinopathy (DR), an important microvascular complication in Latinos with type 2 diabetes.A cross-sectional, family-based, observational cohort study.Latino subjects with type 2 diabetes (n = 507), ascertained in families via a proband with known diabetes duration of 10 years or more and/or with DR, were included.Serum adiponectin was measured and insulin sensitivity was estimated using homeostasis model assessment of insulin resistance (HOMA-IR). DR was assessed by seven-field digital fundus photography and graded using the modified Airlie House classification and the Early Treatment Diabetic Retinopathy Scale (range of severity levels, 10-85).Fasting adiponectin concentrations were elevated in patients with DR compared to those without (12.9 ± 0.5 vs 10.5 ± 0.5 μg/mL; P = .0004) and remained significant after adjusting for multiple covariates (age, gender, body mass index, glycosylated hemoglobin, diabetes duration, statin use, blood pressure, and renal function; P = .013 to .018). Adiponectin was also positively correlated with severity of DR in patients with nonproliferative DR (P < .0003), significant also after all covariate adjustments (P = .018). When the proliferative DR group was included, this relationship was attenuated by adjustments, possibly an influence of estimated glomerular filtration rate reduction in the proliferative DR group. HOMA-IR was not different in the DR and non-DR groups. Although elevated, adiponectin retained a typical inverse relationship with HOMA-IR in DR, similar to that seen in the non-DR group.Serum adiponectin is elevated in DR, is positively correlated with DR severity in Latinos with type 2 diabetes, and maintains a relationship to insulin sensitivity. Adiponectin, whether as a marker or biological mediator, may play an important role in DR, which appears to be independent of its relationship to insulin sensitivity.