It has been shown that the balance between vascular endothelial growth factor (VEGF), a major angiogenic stimulator, and pigment epithelium-derived factor (PEDF), a potent angiogenic inhibitor, is critical for the regulation of vascular permeability and angiogenesis. However, the regulation of the balance is largely unclear. The present study demonstrated that there is a reciprocal interaction between VEGF and PEDF in the retina. PEDF significantly decreased VEGF expression in both retinal capillary endothelial cells (RCEC) and Mü ller cells. This PEDF effect was confirmed in the retina of rats with oxygen-induced retinopathy. Silencing of the PEDF gene by siRNA in Mü ller cells resulted in a significant upregulation of VEGF expression at both the RNA and protein levels, suggesting that PEDF is an endogenous negative regulator of VEGF. The further study of the mechanism showed that PEDF inhibited hypoxia-induced increases in VEGF promoter activity, HIF-1 nuclear translocation and mitogen activated protein kinase phosphorylation. These results suggest that PEDF inhibits VEGF expression at the transcriptional level. In addition, PEDF effectively inhibited VEGF binding to RCEC. Moreover, in vitro receptor-binding assay demonstrated that PEDF competed with VEGF for binding to VEGF receptor 2, which may represent a new mechanism for PEDF activity. On the other hand, VEGF significantly downregulated PEDF expression in RCEC, but not in retinal Mü ller cells, suggesting a VEGF receptormediated process. These results suggest that the reciprocal regulation between VEGF and PEDF may play a role in angiogenic control. The decrease in PEDF levels in the retina is at least partially responsible for the increase in VEGF expression and subsequent vascular leakage and neovascularization in diabetes.