Aims In type 2 diabetes, early effects of strict near-normalization of glucose control on macrovascular and microvascular disease are still uncertain. We evaluated the effects of early dramatic improvement in glycemia on retinal disease in poorly controlled diabetes. Methods A retrospective, case-control study in public hospital patients with type 2 diabetes, who had annual retinal imaging as part of a case management program or standard diabetes care. Patients included had ≥2 two retinal images ≥1 one year apart, and at least 3 HbA1C measurements. Retinal images were graded using a modified Scottish Diabetic Retinopathy grading scheme. An ‘intensive’ group (n=34) with HbA1C decrease >1.5% was compared with randomly chosen patients (n=34) with minimal HbA1C changes. Results Mean HbA1C (±SEM) over two years was similar in intensive (8.5±0.21%) and control groups (8.1±0.28%, p=NS). However, the intensive group had higher baseline HbA1C and a mean maximal decrease of 4.0±0.41% in contrast to the control group (0.2±0.11%). Retinopathy grade progressed +0.7±0.25 units from baseline in the intensive group (p = 0.015), a 22.6% worsening. The control group changed minimally from baseline (0.03±0.14 units, p=NS). Change in retinopathy grade was significantly different between groups (p=0.02). More eyes worsened by ≥1 retinal grade (p=0.0025) and developed sight-threatening retinopathy (p=0.003) in the intensive group. Visual acuity was unchanged. Conclusions Diabetic retinopathy significantly worsened in poorly controlled type 2 diabetes after early intensification of glycemic control and dramatic HbA1C change. Retinal status should be part of risk-factor evaluation in patients likely to experience marked reductions in HbA1C in poorly controlled diabetes.