Diabetic retinopathy (DR) is the leading cause of vision loss among working-age adults. The interplay between hyperglycemia and endothelial activation in inducing endoplasmic reticulum (ER) stress pathways and visual deficits in DR is not fully understood. To address this, we used a mouse model of chronic vascular activation using endothelial-specific tumor necrosis factor-α (TNF-α)-expressing (tie2-TNF) mice to induce diabetes with streptozotocin. At 4 weeks post streptozotocin, a significant 2-fold to 10-fold increase in retinal neurovascular inflammatory gene transcript response in tie2-TNF mice was further increased in diabetic tie2-TNF mice. A decrease in visual acuity and scotopic b-wave amplitude in tie2-TNF mice was further accentuated in diabetic tie2-TNF mice and these changes correlated with a multi-fold increase in retinal ER stress markers and a reduction in adherens junctions. Cultured retinal endothelial cells showed a significant decrease in trans-endothelial resistance as well as VE-cadherin expression under TNF-α and high glucose stress. These changes were partly rescued by tauroursodeoxycholic acid, a potent ER stress inhibitor. Taken together, constant endothelial activation induced by TNF-α further exacerbated by hyperglycemia results in activation of ER stress and chronic proinflammation in a feed forward loop ultimately resulting in endothelial junction protein alterations leading to visual deficits in the retina. Inhibition of ER stress and endothelial activation may prove to be a novel therapeutic target in DR.