To identify genetic susceptibility loci for severe diabetic retinopathy, 286 Mexican-Americans with type 2 diabetes from Starr County, Texas completed detailed physical and ophthalmologic examinations including fundus photography for diabetic retinopathy grading. 103 individuals with moderate-to-severe non-proliferative diabetic retinopathy or proliferative diabetic retinopathy were defined as cases for this study. DNA samples extracted from study subjects were genotyped using the Affymetrix GeneChip® Human Mapping 100K Set, which includes 116,204 single nucleotide polymorphisms (SNPs) across the whole genome. Single-marker allelic tests and 2- to 8-SNP sliding-window Haplotype Trend Regression implemented in HelixTreeTM were first performed with these direct genotypes to identify genes/regions contributing to the risk of severe diabetic retinopathy. An additional 1,885,781 HapMap Phase II SNPs were imputed from the direct genotypes to expand the genomic coverage for a more detailed exploration of genetic susceptibility to diabetic retinopathy. The average estimated allelic dosage and imputed genotypes with the highest posterior probabilities were subsequently analyzed for associations using logistic regression and Fisher's Exact allelic tests, respectively. To move beyond these SNP-based approaches, 104,572 directly genotyped and 333,375 well-imputed SNPs were used to construct genetic distance matrices based on 262 retinopathy candidate genes and their 112 related biological pathways. Multivariate distance matrix regression was then used to test hypotheses with genes and pathways as the units of inference in the context of susceptibility to diabetic retinopathy. This study provides a framework for genome-wide association analyses, and implicated several genes involved in the regulation of oxidative stress, inflammatory processes, histidine metabolism, and pancreatic cancer pathways associated with severe diabetic retinopathy. Many of these loci have not previously been implicated in either diabetic retinopathy or diabetes. In summary, CDC73, IL12RB2, and SULF1 had the best evidence as candidates to influence diabetic retinopathy, possibly through novel biological mechanisms related to VEGF-mediated signaling pathway or inflammatory processes. While this study uncovered some genes for diabetic retinopathy, a comprehensive picture of the genetic architecture of diabetic retinopathy has not yet been achieved. Once fully understood, the genetics and biology of diabetic retinopathy will contribute to better strategies for diagnosis, treatment and prevention of this disease.