We present a theoretical analysis of laser coagulation for diabetic retinopathy (DR) eye surgery procedures. Using a Monte-Carlo multi-layer (MCML) simulation and a finite element model of the human eye, we derive the optimal surgery conditions and address the long standing debate regarding the best laser wavelength to be used. The differences between yellow (577nm) and green (532nm) lasers, which are the commonly used wavelengths for this procedure, have been studied previously, mostly via empirical studies. Here, to the best of our knowledge, we introduce for the first time a quantitative theoretical analysis to determine the best laser wavelength. Using our analysis, we determine optimal laser operation conditions for treating DR with minimal damage to the surrounding tissue. We show that under these conditions, the yellow laser is significantly favorable.