The molecular mechanisms of heparan sulfate proteoglycan downregulation in the glomerular basement membrane (GBM) of the kidneys with diabetic nephropathy remain controversial. In the present study, we showed that the expression of heparanase-1 (HPR1), a heparan sulfate-degrading endoglycosidase, was upregulated in the renal epithelial cells in the kidney with diabetic nephropathy. Urinary HPR1 levels were elevated in patients with diabetic nephropathy. In vitro cell culture studies revealed that HPR1 promoter-driven luciferase reporter gene expression, HPR1 mRNA, and protein were upregulated in renal epithelial cells under high glucose conditions. Induction of HPR1 expression by high glucose led to decreased cell surface heparan sulfate expression. HPR1 inhibitors were able to restore cell surface heparan sulfate expression. Functional analysis revealed that renal epithelial cells grown under high glucose conditions resulted in an increase of basement membrane permeability to albumin. Our studies suggest that loss of heparan sulfate in the GBM with diabetic nephropathy is attributable to accelerated heparan sulfate degradation by increased HPR1 expression.