Progressive microvascular complications are a main feature of diabetes and are associated with impairment of the angiogenic response. Methylglyoxal (MGO) has been implicated in the molecular events that lead to endothelial dysfunction in diabetes. In this study, we hypothesize that increased levels of MGO disrupt the ratio of vascular endothelial growth factor (VEGF) to angiopoietin 2 (Ang 2) secreted by retinal pigment epithelial (RPE) cells, which provides a key destabilizing signal that leads to apoptosis and decreased proliferation of retinal endothelial cells. Indeed, we show that MGO increases the levels of Ang 2 and dramatically decreases the levels of VEGF secreted by RPE cells in response to hypoxia. Downregulation of VEGF is likely to be related to decreased hypoxia-inducible factor-1alpha (HIF-1alpha) protein levels and HIF-1 transcriptional activity. Data further show that MGO-induced imbalance in the VEGF/Ang II ratio significantly changes the levels of BAX and Bcl-2 in endothelial cells. Moreover, this imbalance is accompanied by an increase in the activity of caspase-3 and decreased proliferation of endothelial cells. Data obtained in cell culture systems are consistent with observations in retinas of diabetic animals, where increased availability of MGO is associated with changes in distribution and levels of HIF-1alpha, VEGF and Ang 2 and increased microvascular permeability. In conclusion, the MGO-induced imbalance in the VEGF/Ang 2 ratio secreted by retinal epithelial cells activates apoptosis and decreases proliferation of retinal endothelial cells, which are likely to contribute to endothelial dysfunction in diabetic retinopathy.