The development of edema in the diabetic retina may be caused by vascular leakage and glial cell swelling. To determine whether diabetic retinopathy alters the swelling characteristics of retinal glial cells and changes the properties of the glial membrane K+ conductance, isolated retinas and glial cells of rats were investigated at 4 and 6 months of chemical diabetes. After 6 months of hyperglycemia, application of a hypotonic solution to retinal slices induced swelling of glial cell bodies, a response not observed in control retinas. The osmotic glial cell swelling was blocked by inhibitors of phospholipase A2 or cyclooxygenase and by a thiol-reducing agent. Glial cells from diabetic retinas displayed a decrease of K+ currents that was associated with an altered subcellular distribution of the K+ conductance and a loss of perivascular Kir4.1 protein. The observation that swelling of cells in control retinas was inducible with K+ channel-blocking Ba2+ ions suggests a relationship between decreased K+ inward currents and osmotic cell swelling in diabetic retinas. The data show that glial cells in diabetic retinas are more sensitive to osmotic stress, which is associated with a decrease of K+ currents, than cells in control retinas. It is suggested that these alterations may be implicated in the development of diabetic retinal edema.