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P rostacyclin-stimulating factor (PSF) acts on vascular endothelial cells to stimulate the synthesis of the vasodilatory molecule prostacyclin (PGI2). We have examined the expression, regulation, and hemodynamic bioactivity of PSF both in whole retina and in cultured cells derived from this tissue. PSF was expressed in all retinal cell types examined in vitro, but immunohistochemical analysis revealed PSF mainly associated with retinal vessels. PSF expression was constitutive in retinal pericytes (RPCs) but could be modulated in bovine retinal capillary endothelial cells (RECs) by cell confluency, hypoxia, serum starvation, high glucose concentrations, or inversely by soluble factors present in early vs. late retinopathy, such as TGF-β, VEGF, or bFGF. In addition, RPC-conditioned media dramatically increased REC PGI2 production, a response inhibited by blocking PSF with a specific antisense oligodeoxynucleotide (ODN). In vivo, PGI2 increased retinal blood flow (RBF) in control and diabetic animals. Furthermore, the early drop in RBF during the initial weeks after inducing diabetes in rats, as well as the later increase in RBF, both correlated with levels of retinal PSF. RBF also responded to treatment with RPC-conditioned media, and this effect could be partially blocked using the antisense PSF ODN. We conclude that PSF expressed by ocular cells can induce PGI2, retinal vascular dilation, and increased retinal blood flow, and that alterations in retinal PSF expression may explain the biphasic changes in RBF observed in diabetes.