This is a prospective study to compare the effectiveness of non-mydriatic photography with that of direct ophthalmoscopy in screening for diabetic retinopathy in 153 patients attending a hospital clinic in Hong Kong. Retinal photography under physiological mydriasis and direct ophthalmoscopy of patients with dilated pupils were compared with the ophthalmologists' examination results as a reference standard. The prevalence of diabetic retinopathy in this sample population was 15%. The sensitivity of detecting diabetic retinopathy by retinal photography was higher than that of direct ophthalmoscopy (64% versus 41%; 95% confidence interval of difference, 1.2%-44.3%). Of five patients who had serious retinopathy, retinal photography failed to detect the disease in two; direct ophthalmoscopy failed to detect the disease in all five patients. Specificities of retinal photography and direct ophthalmoscopy were 90% (95% confidence interval, 84%-96%) and 93% (95% confidence interval, 88%-97%), respectively. We conclude that retinal photography is significantly more effective than direct ophthalmoscopy in detecting diabetic retinopathy. In addition, the non-mydriatic camera is easy to use and is the preferred method of screening.