Inclusion Criteria:

• Age >= 18 years. Patients <18 years old are not being included because DME is so rare in this age group that the diagnosis of DME may be questionable.
• Diagnosis of diabetes mellitus (type 1 or type 2)
• Any one of the following will be considered to be sufficient evidence that diabetes is present:

Current regular use of insulin for the treatment of diabetes; Current regular use of oral antihyperglycemia agents for the treatment of diabetes; Documented diabetes by ADA guidelines (see DRCR.net Procedures Manual).

• No history of renal failure requiring dialysis or renal transplant.
• No condition that in the opinion of the investigator would preclude participation in the study (e.g., unstable medical status including blood pressure and glycemic control; Patients in poor glycemic control who recently initiated intensive insulin treatment (a pump or multiple daily injections) or plan to do so in the next 3 months should not be enrolled.
• Ability and willingness to provide informed consent.
• No expectation that subject will be moving out of the area of the clinical center to an area not covered by another clinical center during the next 12 months.

Study Eye Criteria:

At least one eye must meet all of the following criteria:

• Best corrected ETDRS visual acuity score >= 19 letters (approximately 20/400 or better).
• Definite retinal thickening due to diabetic macular edema based on clinical exam at or within 500 microns of the macular center for which the investigator believes laser photocoagulation is indicated.
• A thickness of 250 microns or more in the central subfield OR a thickness of 300 microns or more in any one of the four subfields directly adjacent to the central subfield on OCT.
• No prior focal/grid laser photocoagulation in the macula.
• No prior medical treatment for DME (e.g., intravitreal/peribulbar steroids).
• No panretinal scatter photocoagulation (PRP) within prior 4 months.
• No anticipated need for PRP within next 4 months.
• No major ocular surgery (including cataract extraction, any other intraocular surgery, scleral buckle, glaucoma filter, cornea transplant, etc.) within prior 6 months.
• No Nd:YAG laser capsulotomy within prior 2 months.
• Macular edema is not considered to be due to a cause other than diabetic macular edema. An eye should not be considered eligible (1) if the macular edema is considered to be related to cataract extraction or (2) clinical exam and/or OCT suggests that vitreoretinal interface disease (eg. vitreo-retinal traction or epriretinal membrane) is the primary cause of the macular edema.
• Media clarity, pupillary dilation, and patient cooperation sufficient for adequate fundus photos.
• No ocular condition (other than diabetes) that, in the opinion of the investigator, might affect macular edema or alter visual acuity during the first 12 months of the study (e.g., vein occlusion, uveitis or other ocular inflammatory disease, neovascular glaucoma, Irvine-Gass Syndrome).
• Glaucoma per se is not an exclusion.

A patient may have two "study eyes" only if both are eligible at the time of randomization. An eye that becomes eligible after randomization will not be considered a study eye for purposes of data analyses or treatment decisions although information is being gathered on all eyes)