To evaluate severity of diabetic retinopathy in patients of type 2 diabetes mellitus with diabetic nephropathy. This was a cross sectional study of 159 eyes of 80 patients aged above 40 years, diagnosed to have Type 2 DM with diabetic nephropathy. All the patients were investigated for albuminuria. The retinopathy was evaluated according to the Early Treatment Diabetes Retinopathy Study (ETDRS) classification into non–proliferative diabetic retinopathy (NPDR) and proliferative diabetic retinopathy (PDR). Diabetic macular edema was characterized as clinically significant macular edema (CSME) and non–CSME. The severity of retinopathy was correlated with nephropathy. In this study, mean age of the patients were 58.26± 6.43 years and male to female ratio 1.96:1. Out of 80 diabetic patients, 22(27.5%) patients had microalbuminuria and 58 (72.5 %) had macroalbuminuria. In this study, 67 (83.7%) patients had diabetic retinopathy, out of which 14 (20.9%) patients had mild NPDR, 20 (29.9%) had moderate NPDR, 16 (23.9%) had severe NPDR, 5(7.4%) had very severe NPDR and 12 (17.9%) had PDR. In 22 patients with microalbuminuria 6 (27.3%) had mild NPDR, 4 (5.0%) had moderate NPDR and none had maculopathy. In 58 patients with macroalbuminuria, 8 (13.8%) had mild NPDR, 16 (27.6%) had moderate NPDR, 16 (27.6%) severe NPDR, 5 (8.6%) has very severe NPDR, 4(6.9%) had early PDR and 8(13.8%) had high–risk PDR, 14 (24.1%) had CSME and 4 (6.9%) had non–CSME. In our study, diabetic nephropathy patients with macroalbuminuria had more severe type of DR than patients with microalbuminuria.