OBJECTIVE To determine the incidence, progression and regression of diabetic retinopathy (DR), with corresponding risk factors, in a northeastern Chinese population of patients with type 2 diabetes. METHODS Among 2006 patients who completed baseline examinations in 2012-2013 and underwent re-examination after a mean interval of 21.2 months, 1392 patients with gradable fundus photographs for both baseline and follow-up examinations were included. Incidence was defined as new development of any DR among patients without DR at baseline. An increase of ≥2 scales (concatenating Early Treatment Diabetic Retinopathy Study levels of both eyes) in eyes with DR at baseline was defined as progression, while a reduction of ≥2 scales was defined as regression. RESULTS The age- and sex-standardised incidence, progression and regression were 5.8% (95% CI 4.7% to 6.9%), 26.8% (95% CI 24.8% to 28.8%) and 10.0% (95% CI 8.6% to 11.3%), respectively. In addition to poor blood glucose control, wider central retinal venular equivalent was associated with both incidence (relative risk (RR) 2.17, 95% CI 1.09 to 4.32, for ≥250 µm vs <210 µm) and progression (RR 2.00, 95% CI 1.02 to 3.96, for ≥250 µm vs <210 µm). Patients without insulin therapy (RR 0.64, 95% CI 0.43 to 0.97) and patients with wider central retinal arteriolar equivalent (RR 1.14, 95% CI 1.02 to 1.26, per 10 µm increase) were likely to exhibit DR regression. CONCLUSIONS We determined the incidence, progression and regression of DR among northeastern Chinese patients with type 2 diabetes. Retinal vessel diameters, in addition to blood glucose level, influence the natural evolution of DR.