UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 12, 2012

ISTA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (949) 788-6000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Item 1.01 Entry into a Material Definitive Agreement.

Entry into Rights Agreement

On January 12, 2012, the Board of Directors of ISTA Pharmaceuticals, Inc. (the “Corporation”) approved the adoption of a Preferred Stock Rights Agreement and, effective at 11:59 p.m. New York time on January 12, 2012, declared a dividend distribution of one right (a “Right”) for each outstanding share of the Corporation’s Common Stock to stockholders of record at the close of business on January 27, 2012 (the “Record Date”). Each Right entitles the registered holder to purchase from the Corporation a unit consisting of one one-thousandth of a share (a “Unit”) of Series A Participating Preferred Stock, $0.001 par value (the “Preferred Stock”), at a purchase price of $45.00 per Unit, subject to adjustment. The description and terms of the Rights are set forth in a Preferred Stock Rights Agreement between the Corporation and Computershare Trust Company, N.A., as Rights Agent, dated effective as of January 12, 2012, as may be amended, restated or otherwise modified from time to time (the “Rights Agreement”).

The following summary of the principal terms of the Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, a copy of which is attached hereto as Exhibit 4.1.

Certificates. Initially, the Rights will not be exercisable, the Rights will be attached to the shares of Common Stock underlying the balances indicated in the book-entry account system of the transfer agent for the Common Stock or, in the case of certificated shares, all Common Stock certificates representing shares then outstanding, and no separate rights certificates (“Rights Certificates”) will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a distribution date (the “Distribution Date”) will occur upon the earlier of (i) ten (10) business days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of twenty percent (20%) or more of the outstanding shares of Common Stock (the “Shares Acquisition Date”), or (ii) ten (10) business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning twenty percent (20%) or more of the outstanding shares of Common Stock. Until the Distribution Date (or earlier redemption, exchange, or expiration of the Rights), (i) the Rights will be evidenced by the balances indicated in the book-entry account system of the transfer agent for the Common Stock registered in the names of the holders of the Common Stock or, in the case of certificated shares, the Common Stock certificates, and will be transferred with and only with such shares or, in the case of certificated shares, Common Stock certificates, (ii) confirmation and account statements sent to holders of shares of Common Stock in book-entry form or, in the case of certificated shares, new Common Stock certificates issued after the Record Date, will contain a notation incorporating the Rights Agreement by reference, and (iii) the transfer of any shares of Common Stock or, in the case of certificated shares, certificates for Common Stock, outstanding will also constitute the transfer of the Rights associated with such shares of Common Stock, or in the case of certificated shares, the Common Stock represented by such certificates.

Expiration and Exercise. The Rights are not exercisable until the Distribution Date and will expire at the earlier of the close of business on (i) January 12, 2015 or (ii) on December 21, 2012 if the approval of a majority of the shares of Common Stock voting on the matter at the 2012 annual meeting or a special meeting has not been received prior to such time, unless the Rights are previously redeemed, exchanged or terminated (including by stockholder action in connection with a “Qualified Offer” as defined in the Rights Agreement) as described below.

As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights and the Rights will become transferable apart from the Common Stock. After the Distribution Date, each Right will entitle the holder to purchase for $45.00 (the “Exercise Price”), a fraction of a share of the Corporation’s Preferred Stock with economic terms similar to that of one share of the Corporation’s Common Stock.

“Flip-In.” If an Acquiring Person obtains 20% or more of the Corporation’s Common Stock, then each Right (other than Rights owned by an Acquiring Person or its affiliates) will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of the Corporation’s Common Stock having a then-current market value of twice the Exercise Price.

For example, at an exercise price of $45.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $90.00 worth of Common Stock (or other consideration, as noted above) for $45.00. Assuming that the Common Stock had a per share value of $5.00 at such time, the holder of each valid Right would be entitled to purchase eighteen (18) shares of Common Stock for $45.00.

“Flip-Over.” If, after an Acquiring Person obtains 20% or more of the Corporation’s Common Stock, (a) the Corporation merges into another entity, (b) an acquiring entity merges into the Corporation or (c) the Corporation sells more than 50% of the Corporation’s assets or earning power, then each Right (other than Rights owned by an Acquiring Person or its affiliates) will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of Common Stock of the person engaging in the transaction having a then current market value of twice the exercise price.

Exchange Feature. At any time after the date on which an Acquiring Person obtains 20% or more of the Corporation’s Common Stock and prior to the acquisition by the Acquiring Person of 50% of the outstanding Common Stock, the Board of Directors of the Corporation may exchange the Rights (other than Rights owned by the Acquiring Person or its affiliates), in whole or in part, for shares of Common Stock of the Corporation at an exchange ratio of one share of Common Stock per Right (subject to adjustment). In addition, the Corporation may, at its option, by majority vote of the Board of Directors of the Corporation, at any time before any Person has become an Acquiring Person, exchange all or part of the then outstanding Rights for rights of substantially equivalent value, as determined reasonably and with good faith by the Board of Directors of the Corporation based upon the advice of one or more nationally recognized investment banking firms.

Adjustment for Dilution. The Rights will have the benefit of certain customary anti-dilution provisions.

Redemption. Rights will be redeemable at the Corporation’s option for $0.001 per Right (the “Redemption Price”) at any time on or prior to the fifth day (or such later date as may be determined by the Corporation’s Board of Directors) after the Shares Acquisition Date. Immediately upon the action of the Board of Directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. However, in the event that the Corporation receives a Qualified Offer, the rights may be redeemed by way of a stockholder action taken at a special meeting of stockholders called by the Board of Directors for the purpose of voting on a resolution accepting the Qualified Offer and authorizing the redemption of the Rights pursuant to the provisions of the Rights Agreement. A “Qualified Offer” is an offer that meets, among others, all of the following conditions:

Stockholder Rights. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Corporation, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Corporation, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Corporation or for common stock of the acquiring company as set forth above.

Amendments. The Corporation (by action of the Board of Directors) may amend the terms of the Rights and the Rights Agreement in any respect without the consent of the Rights holders on or prior to the Distribution Date; thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the Rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of Rights holders (other than the Acquiring Person).

Amendment to 2001 Rights Plan

Effective January 12, 2012, the Corporation and Computershare Trust Company, N.A. as successor Rights Agent, executed a Third Amendment to the Preferred Stock Rights

Agreement (the “Third Amendment”), which amended that certain Preferred Stock Rights Agreement, dated as of December 31, 2001 (the “Original 2001 Rights Plan”), by and between the Corporation and Mellon Investor Services LLC (“Mellon”), as amended by the First Amendment to the Preferred Stock Rights Agreement, dated as of November 18, 2002 (the “First Amendment”), by and between the Corporation and Mellon, and by the Second Amendment to the Preferred Stock Rights Agreement, dated as of June 23, 2006 (the “Second Amendment”), by and between the Corporation and U.S. Stock Transfer Corporation (as amended, the “2001 Rights Plan”).

The Third Amendment accelerated the expiration of the Corporation’s preferred stock purchase rights issued under the 2001 Rights Plan. As a result of the Third Amendment, the preferred stock purchase rights expired and the 2001 Rights Plan terminated effective as of 11:58 p.m., New York time on January 12, 2012. The foregoing description of the Third Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Amendment, a copy of which is attached as Exhibit 4.2 and is incorporated herein by this reference.

The Original 2001 Rights Plan was filed as Exhibit 4.2 to the Registration Statement on Form 8-A filed with the Securities and Exchange Commission on January 22, 2002. The First Amendment was filed as Exhibit 4.2 to Form 8-A/A filed with the Securities and Exchange Commission on November 19, 2002. The Second Amendment was filed as Exhibit 4.1 to Form 8-K filed with the Securities and Exchange Commission on June 28, 2006.

Item 3.03 Material Modification to Rights of Security Holders.

Please see the disclosure set forth under Item 1.01, which is incorporated by reference into this Item 3.03.

Item 7.01 Regulation FD Disclosure.

On January 17, 2012, the Corporation issued a press release announcing the adoption of the Rights Agreement and the declaration of the rights dividend. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information furnished pursuant to this Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX