Purpose Diabetic retinopathy (DR) is one of the most severe and common complications caused by diabetic mellites. Inhibiting NLRP3 inflammasome activation displays a crucial therapeutic value in DR. Studies have shown that KCNQ1OT1 plays a critical role in regulating NLRP3 inflammasome activation and participates in the pathogenesis of diabetic complications. The present study aims to explore the role, and the potential mechanism of KCNQ1OT1 in regulating the activation of NLRP3 inflammasome in DR. Methods qRT-PCR was used to detect the expression of KCNQ1OT1, miR-17-5p, TXNIP, NLRP3, ASC, caspase-1 and IL-1β. Western blot was performed to detect the expression of NLRP3, ASC, caspase-1, IL-1β and TXNIP. Immunohistochemistry and immunostaining were performed to detect the expression of caspase-1. The levels of the inflammatory cytokine IL-1β were determined by ELISA assay. FISH was used to detect the subcellular localisation of KCNQ1OT1. Bioinformatic analysis, luciferase reporter assay and in vitro studies were performed to elucidate the mechanism of KCNQ1OT1-mediated dysfunction. Results The expression of KCNQ1OT1 and the activation of NLRP3 inflammasome were increased in experimental DR models. KCNQ1OT1 knockdown alleviated NLRP3 inflammasome-associated molecules expression. In addition, KCNQ1OT1 was found to be localized mainly in the cytoplasm of Müller cells and facilitated TXNIP expression by acting as a miR-17-5p sponge. KCNQ1OT1 promoted the activation of NLRP3 inflammasome through miR-17-5p/TXNIP axis. Conclusions In conclusion, it was found in this study that KCNQ1OT1 promoted the activation of NLRP3 inflammasome both in vitro and in vivo, which was mediated by miR-17-5p/TXNIP axis. KCNQ1OT1 might be an effective interference target for the prevention and treatment of DR.