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To compare research grading of diabetic retinopathy (DR) severity level from compressed digital images versus uncompressed images and film.Compressed (JPEG2000, 37:1) digital images (C) were compared with uncompressed digital (U) and film (F) stereoscopic photographs from a 152-eye cohort with full-spectrum Early Treatment Diabetic Retinopathy Study severity levels for agreement on severity level, DR presence with ascending severity threshold, presence of DR index lesions, and repeatability of grading.Classification of Early Treatment Diabetic Retinopathy Study severity levels from C images agreed substantially with results from F images (κ = 0.60, κw [linear weighted] = 0.86) and uncompressed digital images (κ = 0.76, κw = 0.92). For agreement of uncompressed digital versus F images, κ = 0.62 and κw = 0.86. Distribution of Early Treatment Diabetic Retinopathy Study levels was not significantly different between C and F images (P = 0.09, Bhapkar's test for marginal homogeneity). For presence/absence of DR at 8 ascending severity thresholds, agreement between C and F was “almost perfect” (κ ≥ 0.8). Agreement on severity level between readers with C images was at least as good as that with uncompressed digital image or F. Repeatability of severity threshold grading between readers was similar using C or F images. For identifying individual DR lesions, agreement between C and F ranged from “moderate” to “perfect.” Agreement of grading venous beading from C was slightly lower than from F.Full Early Treatment Diabetic Retinopathy Study scale DR severity level grading using C images is comparable to that using U images or film.