The pathogenesis of diabetic retinopathy (DR) remains unclear but hyperglycemia is an established risk factor. Endothelial dysfunction and changes in Ca2+ signaling have been shown to precede the onset of DR. We recently demonstrated that high extracellular glucose activates the Ca(2+)/calcineurin-dependent transcription factor NFAT in cerebral arteries and aorta, promoting the expression of inflammatory markers. Here we show, using confocal immunofluorescence, that NFAT is expressed in the endothelium of retinal microvessels and is readily activated by high glucose. This was inhibited by the NFAT blocker A-285222 as well as by the ectonucleotidase apyrase, suggesting a mechanism involving the release of extracellular nucleotides. Acute hyperglycemia induced by an IP-GTT (intraperitoneal glucose tolerance test) resulted in increased NFATc3 nuclear accumulation and NFAT-dependent transcriptional activity in retinal vessels of NFAT-luciferase reporter mice. In both Akita (Ins2(+/-) ) and streptozotocin- (STZ-) induced diabetic mice, NFAT transcriptional activity was elevated in retinal vessels. In vivo inhibition of NFAT with A-285222 decreased the expression of OPN and ICAM-1 mRNA in retinal vessels, prevented a diabetes driven downregulation of anti-inflammatory IL-10 in retina, and abrogated the increased vascular permeability observed in diabetic mice. Results identify NFAT signaling as a putative target for treatment of microvascular complications in diabetes.