Diabetic nephropathy is the leading cause of end-stage renal disease in western or westernised countries and the largest contributor to the total cost of diabetes care around the world. In addition to the development of diabetic nephropathy and end-stage renal failure, diabetic patients with evidence of albuminuria have a much higher risk of developing myocardial infarctions, cerebrovascular accidents, severe progressive retinopathy, and peripheral and autonomic neuropathy. A cumulative incidence of diabetic nephropathy has been documented after duration of diabetes of at least 25 years in both type 1 and type 2 diabetic patients, although more recent studies have demonstrated a substantial reduction of its incidence. Before the onset of overt proteinuria, there are several renal functional changes, including renal hyperfiltration, hyperperfusion, and increasing capillary permeability to macromolecules. Basement-membrane thickening and mesangial expansion have long been recognized as pathological hallmark of diabetic nephropathy. It has been postulated that diabetic nephropathy occurs as a result of the interplay of metabolic and haemodynamic factors in the renal microcirculation. Hyperglycaemia plays a pivotal role in the pathogenesis of diabetic renal disease, but genetic factors are also of crucial importance. The accumulation of advanced glycosilation end products (AGEPs), the activation of isoforms of protein kinase C (PKC) and the acceleration of the aldose reductase pathway may explain how hyperglycaemia damages vessels. Growth factors (i.e. TGF-b, IGF-1, VEGF) may also play an important role in the pathogenesis. There is a familial clustering of diabetic kidney disease: a number of gene loci have been investigated to try to explain the genetic susceptibility to this complication. The two main treatment strategies for prevention of diabetic nephropathy are improved glycaemic control and blood pressure lowering, particularly using drugs such angiotensin-converting enzyme inhibitors and angiotensin II receptor antagonists. Many potential treatment modalities in preventing and treating diabetic nephropathy are presently being evaluated; some of them will possibly be available in the near future in order to try to modify the natural course of kidney involvement and disease in patients with diabetes.