Diabetic retinopathy (DR) is characterized by retinal inflammation and gliosis and the interaction between M & uuml;ller cells and microglia plays a crucial role in DR pathogenesis. A sesquiterpene lactones, Parthenolide (PTL), has potent anti-inflammatory effects. This study aimed to evaluate the efficacy of PTL in ameliorating DR and the underlying mechanisms. A co-culture system of primary M & uuml;ller cells and microglia under normoglycemic and hyperglycemic conditions was established. The study utilized immunofluorescent staining, Western blot analysis, ELISA, and molecular docking simulations to assess the influence of PTL on cellular interactions and NF-kappa B signaling modulation. Additionally, an in vivo diabetic mouse model was treated with varying doses of PTL to examine its effects on retinal pathologies, activity of M & uuml;ller cells and microglia, and inflammatory responses. Co- culture with microglia exacerbated hyperglycemia-induced gliosis in M & uuml;ller cells, indicated by increased GFAP expression and reduced GLAST and Kir4.1 levels. PTL treatment significantly attenuated these changes, reducing the pro-inflammatory cytokines and inhibiting microglia activation, as evidenced by decreased Iba-1 expression via suppressing NF-kappa B nuclear translocation. In diabetic mice, PTL demonstrated a dose-dependent protective effect against retinal damage and regulated M & uuml;ller cell activation by inhibiting NF-kappa B activation. PTL effectively mitigates DR by suppressing microglia-induced M & uuml;ller cell gliosis and inflammation, primarily via the NF-kappa B signaling. The findings highlight the potential of targeting M & uuml;ller cell-microglia interactions in DR therapy, offering a novel approach to managing this complication. This study underscores the therapeutic promise of PTL in DR treatment, warranting further clinical exploration.