Background: Diabetes mellitus (DM) is one of the most common non-communicable diseases with an increasing incidence worldwide. Diabetic retinopathy (DR), one of the chronic micro vascular complications, is a major global cause of total blindness. As the global prevalence of diabetes increases, so will the numbers of people with diabetic retinopathy. Hence, this study aims to determine the magnitude and severity of DR in newly diagnosed type 2 DM patients in Menelik II Hospital. Method: institutional based cross sectional study was conducted on newly diagnosed Type 2 DM patients. Data were analyzed using Statistical Package for Social Science (SPSS) 20 version computer software. Result: A total of 111 patients with newly diagnosed type II diabetes participated in this study. The female to male ration was 1: 1.84. The mean age of study participants was 50.5 (± 10.6years) with a range of 30-70 years. Majority of respondents (47.7%) completed secondary school while 18.0% were unable to read and write. The average BMI of participants was 25.0 ± 3.6kg/m2, 37 (33.3%) were overweight, 11(9.9%) were obese. Average FBS at diagnosis was 265.25 (0±99.4 mg/dl) for all patients and about 24.3% of the total study population had hypertension. Diabetic retinopathy was detected in 24 (21.6%) patients out of whom 7(29.16%) had mild NPDR, 8 (33.33%) moderate NPDR 5(20.8%)severe NPDR (20.8%) and 4 (16.7%)PDR . Conclusion: The prevalence of diabetic retinopathy at time of diagnosis among type II diabetes showed 21.6%. This high number of undiagnosed DR indicate early and regular screening for diabetic retinopathy among diabetic patients and more aggressive management of modifiable risk factors could reduce the numbers of people who develop vision-threatening retinopathy.