Retinal endothelial cell (REC) dysfunction induced by diabetes mellitus (DM) is an important pathological step of diabetic retinopathy (DR). Long noncoding RNAs (lncRNAs) have emerged as novel modulators in DR. The present study aimed to investigate the role and mechanism of lncRNA Hotair in regulating DM-induced REC dysfunction. The retinal vascular preparations and immunohistochemical staining assays were conducted to assess the role of Hotair in retinal vessel impairment in vivo. The EdU, transwell, cell permeability, CHIP, luciferase activity, RIP, RNA pull-down, and Co-IP assays were employed to investigate the underlying mechanism of Hotair-mediated REC dysfunction in vitro. Hotair expression was significantly increased in diabetic retinas and high glucose (HG)-stimulated REC. Hotair knockdown inhibited the proliferation, invasion, migration, and permeability of HG-stimulated REC in vitro and reduced the retinal acellular capillaries and vascular leakage in vivo. Mechanistically, Hotair bound to LSD1 to inhibit VE-cadherin transcription by reducing the H3K4me3 level on its promoter and to facilitate transcription factor HIF1α-mediated transcriptional activation of VEGFA. Furthermore, LSD1 mediated the effects of Hotair on REC function under HG condition. The Hotair exerts its role in DR by binding to LSD1, decreasing VE-cadherin transcription, and increasing VEGFA transcription, leading to REC dysfunction. These findings revealed that Hotair is a potential therapeutic target of DR.