Since both retinopathy and nephropathy are major diabetic microvascular complications, we investigated whether severity of diabetic retinopathy (DR) has adverse effects on renal function and albuminuria in the patients with type 2 diabetes mellitus (DM). We screened 2,197 adult patients with type 2 DM who had undergone fundus exam between August 2006 and February 2014. Among them, 1,592 subjects with available serial renal function and albuminuria measurement were included in the analysis. DR status was classified as no DR, non-proliferative DR (NPDR), and proliferative DR (PDR). The risk of CKD progression was assessed according to DR severity. A total of 384 (24.1%) had NPDR and 202 (12.7%) had PDR at either eye. The mean follow-up period was 5.6±2.1 years. DR was associated with lower body mass index, lower plasma hemoglobin, lower serum albumin level, longer duration of DM, poorer control of blood sugar, lower estimated glomerular filtration rate (eGFR), and greater amount of albuminuria. Interestingly, baseline DR severity was associated with faster renal function decline and greater albuminuria progression. In multivariate analysis, NPDR had 2.9 times and PDR had 16.6 times higher risk for CKD progression. Our findings showed that baseline DR severity is a prognostic factor for future CKD progression in type 2 DM patients. Therefore, clinicians must evaluate DR severity at the first visit and closely monitor renal function and albuminuria in the subjects with severe DR.