This paper reviews the anatomic and physiologic conditions which predispose to fluid accumulation within the retina. Retinal edema has its inception in disease that causes a breakdown of the blood-retinal barrier in retinal capillaries and/or the retinal pigment epithelium (RPE). Edema develops not only because protein and fluid enter the extracellular space, but because the external limiting membrane and the convoluted extracellular pathway within the retina limit the clearance of albumin and other large osmotically-active molecules. These molecules bind water to cause edema. Recognition of edema clinically is complicated by the facts that angiographic markers (fluorescein and ICG) do not match albumin in size, and that clinical leakage does not always correlate closely with tissue swelling or functional loss. Active water transport across the RPE is efficient at removing subretinal water, but the flow resistance of the retina limits RPE access to the water of retinal edema. Consideration of the pathophysiology of retinal edema may aid in the development of better strategies for managing retinal edema.