Purpose: To investigate the safety and efficacy of diquafosol tetrasodium, a P2Y2 receptor agonist that stimulates fluid and mucin secretion on the ocular surface, as a novel topical treatment of dry eye disease. Methods: Subjects with dry eye (n = 527) were evaluated in a randomized, double-masked, parallel-group trial comparing 24 weeks of treatment with 2 concentrations of diquafosol (1% and 2%) versus placebo instilled 4 times daily. Corneal staining, conjunctival staining, Schirmer tests, and subjective symptoms of dry eye were evaluated. Use of artificial tears was permitted as necessary. Results: Subjects treated with 2% diquafosol had significantly lower corneal staining scores compared with placebo at the 6-week, primary efficacy time point (P < 0.001), and superiority continued throughout the 24-week study. Reductions in corneal staining were observed as early as after 2 weeks of treatment, were maintained throughout the 24-week study, and were observed to worsen slightly (toward baseline) when diquafosol treatment was discontinued (week 25). Results for conjunctival staining were consistent with those observed for corneal staining. Schirmer scores at week 6 were significantly higher with diquafosol treatment than with placebo (P ≤ 0.030). The percentage of subjects with clearing of foreign body sensation (score of 0) was higher at week 6 in subjects treated with 2% diquafosol (21%) compared with placebo (15%), but the difference did not achieve significance (P = 0.193). Significant differences in favor of diquafosol were observed for clearing of foreign body sensation and for worst symptom in secondary data analyses. Conclusion: Diquafosol tetrasodium was well tolerated and was superior to placebo (vehicle) in reducing corneal staining and in relieving certain patient symptoms. Diquafosol has a favorable risk/benefit profile in a broad spectrum of patients with dry eye disease and is a novel topical treatment of dry eye.