Diabetic retinopathy (DR) is a chronic, progressive and multi-factorial disorder with retinal microvascular dysfunction being the major component. Retinal inflammation plays a key pathogenic role in DR. Peroxisome Proliferator-Activated Receptor α (PPARα), a hormone-activated nuclear receptor, is known as an important modulator of lipid metabolism. Two large, longitudinal clinical studies reported independently that activation of PPARα by fenofibrate has robust therapeutic effects on DR in type 2 diabetic patients. PPARα is expressed at high levels in normal retinas, and retinal PPARα levels are down-regulated in diabetic human donors and diabetic animal models. We found that PPARα confers potent anti-inflammatory and anti-oxidant effects in the retina with DR. This presentation will summarize our recent studies on molecular mechanism underlying the anti-inflammatory activity of PPARα, which is responsible, at least in part, for the therapeutic effect of fenofibrate on DR. This presentation will also summarize our studies regarding the molecular mechanism for the diabetes-induced PPARα down-regulation in the retina.