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Type 2 diabetes mellitus (T2DM), characterized by hyperglycemia and dyslipidemia, leads to nonproliferative diabetic retinopathy (NPDR). NPDR is associated with blood-retina barrier disruption, plasma exudates, microvascular degeneration, elevated inflammatory cytokine levels, and monocyte (Mo) infiltration. Whether and how the diabetes-associated changes in plasma lipid and carbohydrate levels modify Mo differentiation remains unknown. Here, we show that mononuclear phagocytes (MPs) in areas of vascular leakage in DR donor retinas expressed perilipin 2 (PLIN2), a marker of intracellular lipid load. Strong upregulation of PLIN2 was also observed when healthy donor Mos were treated with plasma from patients with T2DM or with palmitate concentrations typical of those found in T2DM plasma, but not under high-glucose conditions. PLIN2 expression correlated with the expression of other key genes involved in lipid metabolism (ACADVL, PDK4) and the DR biomarkers ANGPTL4 and CXCL8. Mechanistically, we show that lipid-exposed MPs induced capillary degeneration in ex vivo explants that was inhibited by pharmaceutical inhibition of PPARγ signaling. Our study reveals a mechanism linking dyslipidemia-induced MP polarization to the increased inflammatory cytokine levels and microvascular degeneration that characterize NPDR. This study provides comprehensive insights into the glycemia-independent activation of Mos in T2DM and identifies MP PPARγ as a target for inhibition of lipid-activated MPs in DR.