Hypoxia is a common feature of diabetic tissues, which highly correlates to the progression of diabetes. The formation of hypoxic context is induced by disrupted oxygen homeostasis that is predominantly driven by vascular remodeling in diabetes. While different types of vascular impairments have been reported, the specific features and underlying mechanisms are yet to be fully understood. Under hypoxic condition, cells upregulate hypoxia-inducible factor-1α (HIF-1α), an oxygen sensor that coordinates oxygen concentration and cell metabolism under hypoxic conditions. However, diabetic context exploits this machinery for pathogenic functions. Although HIF-1α protects cells from diabetic insult in multiple tissues, it also jeopardizes cell function in the retina. To gain a deeper understanding of hypoxia in diabetic complications, we focus on the formation of tissue hypoxia and the outcomes of HIF-1α dysregulation under diabetic context. Hopefully, this review can provide a better understanding on hypoxia biology in diabetes.