Diabetic Macular Edema (DME) is an advanced stage of Diabetic Retinopathy (DR) and can lead to permanent vision loss. Currently, it affects 26.7 million people globally and on account of such a huge number of DME cases and the limited number of ophthalmologists, it is desirable to automate the diagnosis process. Computer-assisted, deep learning based diagnosis could help in early detection, following which precision medication can help to mitigate the vision loss. Method: In order to automate the screening of DME, we propose a novel DMENet Algorithm which is built on the pillars of Convolutional Neural Networks (CNNs). DMENet analyses the preprocessed color fundus images and passes it through a two-stage pipeline. The first stage detects the presence or absence of DME whereas the second stage takes only the positive cases and grades the images based on severity. In both the stages, we use a novel Hierarchical Ensemble of CNNs (HE-CNN). This paper uses two of the popular publicly available datasets IDRiD and MESSIDOR for classification. Preprocessing on the images is performed using morphological opening and gaussian kernel. The dataset is augmented to solve the class imbalance problem for better performance of the proposed model. Results: The proposed methodology achieved an average Accuracy of 96.12\%, Sensitivity of 96.32\%, Specificity of 95.84\%, and F−1 score of 0.9609 on MESSIDOR and IDRiD datasets. Conclusion: These excellent results establish the validity of the proposed methodology for use in DME screening and solidifies the applicability of the HE-CNN classification technique in the domain of biomedical imaging. © 2020 Singh, Gorantla. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.