Objective: To test the hypothesis that progression of diabetic retinopathy in pregnancy is associated with reduced fetal growth and related neonatal morbidity. Methods: Women with type 1 diabetes ( n = 205) were enrolled before 14 weeks’ gestation in a prospective study of diabetes in pregnancy and treated with intensive insulin therapy. They had serial ophthalmologic evaluations before 20 weeks’ gestation and in late gestation or postpartum. Subjects were divided into two groups based on whether retinopathy progressed (progression group) or remained unchanged (no progression group). Results: Retinopathy progressed in 59 of 205 women (29%) and was associated with advanced White classification ( P = .001): three (5%) were class B, 14 (23%) class C, 24 (41%) class D, and 18 (30%) class F-RF. Reduced fetal growth was associated with progression of retinopathy. Mean birth weight was lower ( P = .02), and more infants were small for gestational age ( P = .02) and had low birth weights ( P = .02) in the progression group. More large-for-gestational-age infants were noted in the no-progression group ( P = .04). Birth weight percentile distributions showed a shift of the curve to the left in the progression group ( P = .03). There were no differences in gestational age at delivery, macrosomia, preterm delivery, respiratory distress syndrome, neonatal hypoglycemia, or neonatal death. Small for gestational age was associated with chronic hypertension (odds ratio [OR] 6.4; 95% confidence interval [CI] 1.5, 27.9) and retinopathy progression (OR 4.7; 95% CI 1.2, 23.8). Conclusion: Development and progression of diabetic retinopathy during pregnancy were associated with reduced fetal growth manifested as increased rate of small-for-gestational-age and low-birth-weight infants.