Diabetic nephropathy is one of the microvascular complications of diabetes. The pathophysiology involves an interaction between metabolic and hemodynamic factors. Metabolic factors include advanced glycation, increased formation of polyols and activation of protein kinase C (PKC). Hemodynamic factors include systemic hypertension, intraglomerular hypertension and the role of vasoactive hormones, such as angiotensin II. Clinical course progresses from microalbuminuria to overt proteinuria and then to renal failure. The disease cannot be cured, but can be prevented or limited in progression. The most important measures to be taken are maintenance of normoglycemia and normal blood pressure and protein diet restriction. Antihypertensive therapy has a major role in slowing the progression of diabetic nephropathy. Renal replacement therapy is available and the best method is kidney transplantation, if not contraindicated.