Diabetic retinopathy (DR) represents a leading cause of blindness worldwide, early detection is critical to prevent vision loss. However, traditional screening methods, which rely on human experts, prove to be costly and time-consuming. The systematic review aims to assess the validity of artificial intelligence (AI) as a screening tool for detecting DR among diabetic patients. A systematic literature search was performed of the following databases: PubMed, Scopus, CINAHL, and Web of Science. The last date of our search was January 31, 2024. We included all observational studies, including cohort, case–control and cross-sectional studies and evaluated their quality using the Joanna Briggs Institute tool. We included diagnostic test accuracy studies evaluating the use of AI algorithms for DR screening in patients with diabetes. Studies were excluded if they exclusively assessed diagnostic accuracy for DR that did not use AI algorithms as a diagnostic tool and studies with incomplete or inaccessible data. Thirteen studies with sample sizes ranging from 69 to 1378 participants, reported good sensitivity of AI for detecting visually threatening DR (VTDR). The lowest sensitivity was 89.2%, and the highest was 100%. In terms of specificity, Any DR exhibited higher specificity compared to RDR and VTDR, ranging from 80.2% to 100%. The sensitivity and specificity of the Artificial Intelligence (AI)-based tools available for DR screening was considered acceptable, especially in detecting VTDR and Any DR, was regarded as good. These results implied the potential usefulness of these tools for DR screening in settings with limited resources. However, further high-quality comparative studies were deemed necessary to evaluate their effectiveness in real-world clinical settings.