Several genes that predispose to type 2 diabetes have recently been identified. In addition to the recognized and powerful effects of environmental factors, there is abundant evidence in support of genetic susceptibility to the microvascular complication of nephropathy in individuals with both type 1 and type 2 diabetes. Familial aggregation of phenotypes such as end-stage renal disease, albuminuria, and chronic kidney disease have routinely been reported in populations throughout the world, and heritability estimates for albuminuria and glomerular filtration rate demonstrate strong contributions of inherited factors. Recent genome-wide linkage scans have identified several chromosomal regions that likely contain diabetic nephropathy susceptibility genes, and association analyses have evaluated positional candidate genes under these linkage peaks. These complimentary approaches have demonstrated that polymorphisms in the carnosinase 1 gene on chromosome 18q, the adiponectin gene on 3q, and the engulfment and cell motility gene on 7p are likely associated with susceptibility to diabetic nephropathy. Additional genes that seem to be of importance in renal phenotypes include manganese superoxide dismutase and angiotensin 1-converting enzyme, with nitric oxide synthase implicated in albuminuria. This article reviews the inherited aspects of diabetic kidney disease with particular emphasis on recently implicated genes and pathways. It seems likely that the risk for diabetes-associated kidney disease is magnified by inheriting risk alleles at several susceptibility loci, in the presence of hyperglycemia.