Aim To assess the relationship between plasma neutrophil gelatinase‐associated lipocalin (NGAL) levels and diabetic retinopathy in patients with Type 2 diabetes. Methods In total, 204 patients with Type 2 diabetes were investigated in this cross‐sectional study. They were classified as having no diabetic retinopathy, non‐proliferative diabetic retinopathy (NPDR) or proliferative retinopathy (PDR), according to the degree of diabetic retinopathy. Thus, diabetic retinopathy in the patients in this study was either NPDR or PDR. Results Plasma NGAL concentrations were significantly higher in patients with diabetic retinopathy than in those without. The mean plasma NGAL levels differed significantly according to the severity of diabetic retinopathy (no diabetic retinopathy, 120.8 ng/ml; NPDR, 217.8 ng/ml; PDR, 372.4 ng/ml; P for trend = 0.002) after adjustment for other covariates. In multivariable analysis, plasma NGAL levels were significantly associated with diabetic retinopathy (odds ratio for each standard deviation increase in the logarithmic value, 7.75; 95% confidence interval, 2.04–29.41, P = 0.003). Conclusion Plasma NGAL levels were positively associated with diabetic retinopathy in patients with Type 2 diabetes.