OBJECTIVE To determine the effectiveness of combined macular modified grid and peripheral panretinal photocoagulation in diabetic eyes with both macular edema and proliferative retinopathy. METHODS We evaluated 52 eyes with diffuse diabetic macular edema and proliferative diabetic retinopathy. Treatment was performed in two sessions consisting of initial modified grid to the macula and panretinal photocoagulation to the inferior half of the peripheral retina, followed 2 to 4 weeks later by panretinal photocoagulation to the superior half. RESULTS At one year, visual acuity was improved in 8%, stable in 79%, and worse in 13%. At two years, visual acuity was improved in 4%, stable in 72%, and worse in 24%. Macular edema resolved in 43 of 46 eyes (93%), and proliferative retinopathy was reduced in 25 of 29 eyes (86%) at last examination. CONCLUSIONS Combined macular modified grid and peripheral panretinal photocoagulation is an effective treatment approach in diabetic eyes with both macular edema and proliferative retinopathy. Laser photocoagulation in those diabetic eyes with diffuse diabetic macular edema and proliferative diabetic retinopathy can be completed in less number of treatment sessions with this method, compared to conventional treatment techniques.