We hypothesize that late-life depression is a manifestation of microvascular disease in patients with type 2 diabetes. We conducted a clinic-based cross-sectional study, comparing retinal vascular caliber, a marker of microvascular disease, in participants with type 2 diabetes with major depression (n=34), without depression (n=27) and healthy non-diabetic controls (n=38). Retinal vascular caliber was measured from digital retinal photographs using a validated computer-assisted method. After adjusting for age and gender, there was a trend of increasing retinal arteriolar caliber from healthy controls (132.6 microm), to diabetic patients without depression (139.2 microm), and diabetic patients with major depression (145.3 microm, P=0.008). The trend in retinal arteriolar caliber remains significant after adjusting for duration of diabetes, but not after further adjusting for vascular risk factors. Our findings suggest that there is variation in the retinal vascular caliber between type 2 diabetic patients with and without major depression and non-diabetic controls. This variation was largely related to poorer diabetes control and a higher frequency of vascular risk factors in diabetic patients, particularly those with depression. Studies with larger sample size may provide further insights into this association.