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Diabetic retinopathy (DR) is a complication secondary to diabetes and is the number one cause of blindness among working age individuals worldwide. Despite recent therapeutic breakthroughs using pharmacotherapy, a cure for DR has yet to be realized. Several clinical trials have highlighted the vital role dyslipidemia plays in the progression of DR. Additionally, it has recently been shown that activation of Liver X receptor (LXRα/LXRβ) prevents DR in diabetic animal models. LXRs are nuclear receptors that play key roles in regulating cholesterol metabolism, fatty acid metabolism and inflammation. In this manuscript, we show insight into DR pathogenesis by demonstrating an innovative signaling axis that unifies key metabolic regulators, Sirtuin 1 and LXR, in modulating retinal cholesterol metabolism and inflammation in the diabetic retina. Expression of both regulators, Sirtuin 1 and LXR, are significantly decreased in diabetic human retinal samples and in a type 2 diabetic animal model. Additionally, activation of LXR restores reverse cholesterol transport, prevents inflammation, reduces pro-inflammatory macrophages activity and prevents the formation of diabetes-induced acellular capillaries. Taken together, the work presented in this manuscript highlights the important role lipid dysregulation plays in DR progression and offers a novel potential therapeutic target for the treatment of DR., Highlights • Diabetes affects retinal Liver X Receptor and Sirtuin 1 expression levels. • Liver X Receptor normalized reverse cholesterol transport and prevented diabetes-induced inflammation in retinal cells. • Liver X Receptor activation reduced the number of pro-inflammatory macrophages and prevented DR-like pathology. Results of recent clinical trials demonstrate strong association between lipid abnormalities and progression of diabetic retinopathy (DR), the sight-threatening secondary complication of diabetes. This study addresses the role of key metabolic lipid regulators, SIRT1 and LXR in the progression of DR. All the components of SIRT1-LXR axis were downregulated in retinal cells isolated from human donor tissue or a DR animal model. Activation of LXR normalized reverse cholesterol transport, prevented diabetes-induced inflammation, reduced the number of pro-inflammatory macrophages and prevented DR-like pathology, suggesting that control of SIRT1-LXR axis could be a promising therapeutic target for treatment of DR.