Objective: To assess whether phacoemulsification cataract surgery exacerbates the development and progression of diabetic retinopathy (DR) in a cataract surgical cohort. Design: Clinic-based cohort study. Participants: Patients aged 65+ years undergoing cataract surgery at an eye clinic in Sydney, Australia, between 2004 and 2006. Methods: Digital retinal photography was performed after pupil dilation preoperatively and at 1-, 6-, and 12-month postoperative visits. DR was assessed using the modified Early Treatment Diabetic Retinopathy Study (ETDRS) classification. Preoperative and 1-month postoperative (baseline) photographs were compared side-by-side with 12-month postoperative photographs. Odds ratios (ORs) and 95% confidence intervals (CIs) were calculated for DR progression in operated (pseudophakic) compared with nonoperated (phakic) eyes, adjusted for age, sex, diabetes duration, and preoperative glycosylated hemoglobin level. Main Outcome Measures: Incident DR was defined in eyes without DR at baseline in which DR was detected at 12-month postoperative visits. DR progression was defined as an increase of 1 or more ETDRS steps during the same period, including incident cases. Results: Of 1994 surgical patients recruited, 190 (9.53%) with diabetes and complete data and thus were included. There were 56 patients with unilateral surgery performed before baseline (mean postoperative duration 3.3±3.3 years). The prevalence of DR at baseline was higher in these 56 pseudophakic eyes than in 324 phakic eyes (71.4% vs. 48.2%, respectively, adjusted OR 2.16; 95% CI, 1.16-4.03). Of the 190 patients, 169 were followed for 12+ months postoperatively; 278 eyes were pseudophakic, and 60 eyes remained phakic at 12 months. During the 12-month postoperative period, incident DR developed in 28.2% of pseudophakic eyes and 13.8% of phakic eyes (adjusted OR 2.65; 95% CI, 1.06-6.61). In a paired-eye comparison of 45 patients who remained unilaterally pseudophakic at 12 months and were at risk of DR progression, 35.6% of pseudophakic eyes exhibited DR progression compared with 20.0% of the fellow phakic eyes (adjusted OR 2.21; 95% CI, 0.85-5.71). Conclusions: Diabetic patients undergoing phacoemulsification cataract surgery appear to have a doubling of DR progression rates 12 months after surgery. This outcome, however, represents less progression than was previously documented with intracapsular and extracapsular cataract surgical techniques. Financial Disclosure(s): The author(s) have no proprietary or commercial interest in any materials discussed in this article.