OBJECTIVE: We determined the longitudinal association of glucose metabolism with retinopathy in a sample of the Australian population. RESEARCH DESIGN AND METHODS: The Australian Diabetes Obesity and Lifestyle (AusDiab) study is a national, longitudinal study of adults aged > or =25 years from 42 randomly selected areas of Australia. Retinopathy was assessed at baseline in 1999-2000 and 5 years later in 2004-2005 in participants identified as having diabetes (based on self-report and oral glucose tolerance test) and impaired glucose metabolism and in a random sample with normal glucose tolerance. Complete retinal data were available for 1,192 participants. Photographs were graded at two time points according to a simplified version of the Wisconsin grading system. RESULTS: The 5-year incidences of retinopathy were 13.9 and 3.0% among those with known and newly diagnosed diabetes at baseline, respectively. Of those who developed incident newly diagnosed diabetes at follow-up, 11.9% had retinopathy at baseline compared with 5.6% of those who did not progress to incident newly diagnosed diabetes (P = 0.037). After adjustment for factors identified as risk factors for diabetes, individuals with retinopathy signs at baseline were twice as likely to develop incident newly diagnosed diabetes compared with those who did not have retinopathy signs at baseline. CONCLUSIONS: The 5-year incidence of retinopathy was 13.9% among individuals with known diabetes. Nondiabetic individuals with retinopathy signs at baseline had a twofold higher risk of developing incident newly diagnosed diabetes 5 years later. This result provides further evidence that mild retinopathy signs may be a preclinical marker of underlying microvascular disease and future diabetes risk.