The main concern in the study of DME is directed towards early detection of associated retinal thickening which is better correlated with visual acuity. In our work we studied 57 eyes (33 with DME and 24 normal), with the new technique of OCT, that gives quantitative measurements of retinal thickness, to study the morphological features of DME. Also, we studied the functional aspects using both conventional and the newly developed mf-ERG. Three patterns of retinal thickening could be detected with OCT; namely sponge-like swelling, cystic changes and serous retinal detachment. OCT was able to detect retinal thickening earlier than the clinical examination. Mf-ERG was superior to the conventional ERG in detecting functional deterioration caused by DME. Both retinal thickness by OCT and b-wave amplitude of the foveal response in mf-ERG were significantly correlated with each other and with best corrected visual acuity