Inflammation, neurodegeneration and microvascular irregularities are included in the spectrum of defects associated with diabetic retinopathy. Here, we evaluated intraocular deliverability features of two pigment epithelium-derived factor (PEDF) derivatives given as eye drops and their efficacy in modulating diabetes-induced retinal complications. The antiangiogenic PEDF60-77 (P60) and neuroprotective PEDF78-121 (P78) derivatives were applied to Ins2(Akita) mouse eyes once a week for 15 wks at the onset of hyperglycemia. Peptides, labeled with Alexa Fluor 488, were observed penetrating the cornea by 1-4 h and gained access to the ciliary body, retinal pigment epithelium (RPE)-choroid complex, retina microvasculature and vitreous. Peak vitreous levels were 0.2 μg/mL for P60 and 0.9 μg/mL for P78 after 0.5 and 4 h, respectively. Both peptides reduced vascular leakage by ~60% and increased zona occludens 1 (ZO1) and occludin expression in the microvasculature to nondiabetic levels. P60 induced pERK1/2 and P78 promoted pAKT in Muller glia, two signals that were dampened in diabetic conditions. Pharmacologically inhibiting AKT signaling in the retina blocked effects of the peptides on ZO1 and occludin expression. P78 reduced levels of 9/20 cytokines in diabetic vitreous including interferon (IFN)-γ, interleukin (IL)-6, IL-3 and tumor necrosis factor (TNF)-α. P60 lowered levels of 6/20 cytokines but was less effective than P78. Neuroprotective P78 prevented diabetes-induced microglia activation by ~60%, retinal ganglion cell (RGC) death by ~22% and inner plexiform layer thinning by ~13%. In summary, we provide evidence that PEDF bioactive derivatives gained access to the retina by topical delivery and validated their efficacy in reducing diabetic retinopathy complications. Our findings argue for glia regulation of microvascular leakage and an early root cause for RGC degeneration embedded in microglia activation.