Aim: To determine whether macrovascular disease assessed by carotid ultrasonography and arterial stiffness by pulse wave velocity are independently associated with diabetic retinopathy in type 2 diabetes. Methods: A random subgroup of surviving participants with type 2 diabetes from the Fremantle Diabetes Study Phase II were invited to take part in this sub-study in 2018–2019. In addition to standardized questionnaires, a physical examination and fasting biochemical tests, each underwent dilated colour fundus photography, carotid arterial ultrasonography with measurement of the intima–media thickness (IMT) and quantification of the degree of stenosis, and pulse wave analysis calculation of the carotid–femoral pulse wave velocity (cfPWV). The cross-sectional association between arterial disease parameters and diabetic retinopathy was assessed using generalized estimating equation models which enabled both eyes to be included in the analysis. Results: Some 270 participants [mean ± sd age 72 ± 9 years, 153 (57%) men and median (IQR) diabetes duration 15 (11–22) years] were included in analysis. Of 524 assessable eyes, 82 (16%) had diabetic retinopathy. In multivariable analysis, significant independent associates of diabetic retinopathy were age at diabetes diagnosis (inversely), HbA1c, insulin treatment and urinary albumin to creatinine ratio (all P ≤ 0.022), as well as cfPWV [odds ratio (OR) 1.13, 95% confidence interval (CI) 1.03, 1.23 per 1 m/s increase; P = 0.008] and common carotid artery (CCA) IMT ≥1 mm (OR 2.95, 95% CI 1.21, 7.23; P = 0.018). Conclusions: The association between diabetic retinopathy and CCA IMT suggests that carotid disease may share cardiovascular risk factors with diabetic retinopathy. The association between diabetic retinopathy and cfPWV may reflect the consequences of altered intravascular haemodynamics.