Inflammation plays an important role in diabetes-induced retinal vascular leakage. The purpose of this study is to examine the role of endoplasmic reticulum (ER) stress and the signaling pathway of ER stress–induced activating transcription factor 4 (ATF4) in the regulation of Müller cell–derived inflammatory mediators in diabetic retinopathy. In diabetic animals, elevated ER stress markers, ATF4, and vascular endothelial growth factor (VEGF) expression were partially localized to Müller cells in the retina. In cultured Müller cells, high glucose induced a time-dependent increase of ER stress, ATF4 expression, and inflammatory factor production. Inducing ER stress or overexpressing ATF4 resulted in elevated intracellular adhesion molecule 1 and VEGF proteins in Müller cells. In contrast, alleviation of ER stress or blockade of ATF4 activity attenuated inflammatory gene expression induced by high glucose or hypoxia. Furthermore, we found that ATF4 regulated the c-Jun NH 2-terminal kinase pathway resulting in VEGF upregulation. ATF4 was also required for ER stress–induced and hypoxia-inducible factor-1α activation. Finally, we showed that administration of chemical chaperone 4-phenylbutyrate or genetic inhibition of ATF4 successfully attenuated retinal VEGF expression and reduced vascular leakage in mice with STZ-induced diabetes. Taken together, our data indicate that ER stress and ATF4 play a critical role in retinal inflammatory signaling and Müller cell–derived inflammatory cytokine production in diabetes.