Dry eye is the most common ocular surface disorder and is associated with diabetes mellitus, which significantly increases its incidence through metabolic dysregulation and nerve damage. These changes adversely affect patients' quality of life, and the diagnosis and treatment of diabetic dry eye face challenges in practice. Pathogenic mechanisms include the accumulation of advanced glycation end products, oxidative stress, corneal neuropathy, and impaired nerve regulation that disrupt the lacrimal functional unit. This leads to reduced tear secretion and tear film instability. The article summarizes clinical manifestations, diagnostic strategies such as confocal microscopy and tear fluid biomarkers. The review highlights recent therapeutic advances and novel mechanism-based treatments. Overall, it offers knowledge to support early diagnosis and accurate therapy of diabetic dry eye.