AbstractDiabetes is a major risk factor for compromised visual health, leading to retinal vasculopathy and neuropathy, both of which are hallmarks of neurovascular unit dysfunction. Despite the critical impact of diabetic retinopathy, the precise mechanism underlying neurovascular coupling and effective strategies to suppress neurovascular dysfunction remain unclear. In this study, the up‐regulation of a tRNA‐derived stress‐induced RNA, 5′tiRNA‐His‐GTG, in response to diabetic stress is revealed. 5′tiRNA‐His‐GTG directly regulates Müller glia action and indirectly alters endothelial angiogenic effects and retinal ganglion cell (RGC) survival in vitro. Downregulation of 5′tiRNA‐His‐GTG alleviates diabetes‐induced retinal neurovascular dysfunction, characterized by reduced retinal vascular dysfunction, decreased retinal neurodegeneration, and improved visually‐guided behaviors in vivo. Mechanistically, 5′tiRNA‐His‐GTG acts as a key regulator of retinal neurovascular dysfunction, primarily by modulating arachidonic acid (AA) metabolism via the CYPs pathway. The 5′tiRNA‐His‐GTG‐CYP2E1‐19(S)‐HETE signaling axis is identified as a key driver of retinal neurovascular dysfunction. Thus, targeting 5′tiRNA‐His‐GTG presents a promising therapeutic strategy for treating vasculopathy and neuropathy associated with diabetes mellitus. Modulating this novel signaling pathway can open up new avenues for intervention in diabetic retinopathy and its related complications.