BACKGROUND: The precise link between diabetic retinopathy and incident heart failure remains unclear, largely limited by a lack of echocardiographic data. This study evaluated how the clinical severity of retinopathy relates to incident heart failure and baseline cardiac function in individuals with type 2 diabetes. METHODS: This retrospective cohort study (2005-2021) included adults with type 2 diabetes receiving structured management and color fundus imaging. Retinopathy was classified as absent, mild nonproliferative, or moderate-to-severe nonproliferative to proliferative. A specific subcohort received baseline transthoracic echocardiography. Relationships between cardiac function parameters and retinal damage were assessed using ordinal logistic regression with inverse probability weighting. Incident heart failure risk was determined utilizing Cox proportional hazards and Poisson regression models. RESULTS: Among 21 773 participants, heart failure was independently associated with advanced retinopathy (OR, 1.23). After inverse probability weighting (IPW), associations with systolic dysfunction (unweighted OR, 1.96; IPW-adjusted OR, 2.01) and diastolic dysfunction were significant, with the latter explicitly unmasked by IPW (unweighted OR, 1.08 vs. IPW-adjusted OR, 1.17). The risk for incident heart failure escalated alongside progressive retinal damage. Compared to patients presenting without retinopathy, the adjusted incidence rate ratios were 1.64 for the mild group and 1.86 for those with moderate-to-severe or proliferative disease, an association partially mediated by renal function decline. CONCLUSIONS: Diabetic retinopathy severity associates with systolic and diastolic dysfunction and is an independent risk factor for incident heart failure in type 2 diabetes. Routine retinal evaluation serves as a practical clinical indicator for assessing systemic microvascular damage and cardiovascular risk.