Huang Qi (root of Astragalus membranaceus) and Dang Gui ( Angelica sinensis), two of the most widely used herbs in traditional Chinese medicine, have been proven to be effective in the treatment of diabetes mellitus (DM) although the underlying molecular mechanisms are not fully elucidated. This study was designed to investigate the protective effect of Dang Gui and Huang Qi mixture (GQM) on the development of diabetic nephropathy in rats with streptozotocin (STZ)-induced DM and the possible underlying molecular mechanism. The diabetic animal model was made by a single intraperitoneal injection of STZ and then treated with GQM or benazepril. Blood glucose, triglyceride (TG), cholesterol (CHO), high density lipoprotein (HDL), serum creatinine (Scr), creatinine clearance rate (Ccr), blood urea nitrogen (BUN), urine beta (2)-microglobin (beta (2)-MG), kidney/body weight (K/B) ratio, glomerular area (GA), renal transforming growth factor-beta (1) (TGF-beta (1)) mRNA expression and blood and renal angiotensin II (AngII) expression were determined 8 weeks after the treatment. The blood glucose, CHO and TG levels, BUN, SCr, Ccr. K/B ratio, GA, the excretion of beta (2)-MG, renal TGF-beta (1) mRNA expression and blood and renal AngII expression were significantly increased while the HDL level was decreased 8 week after STZ injection. The changes in blood glucose, TG, CHO and HDL were reversed by GQM, not by benazepril, whereas the changes in other variables were reversed by both GQM and benazepril. Our results suggest that GQM alleviates the disorder in blood glucose and lipids, protects against the progression of renal nephropathy in diabetic rats, probably by inhibiting the expression of AngII and TGF-beta (1) mRNA.