Losartan treatment reduced renal outcomes in proteinuric patients with type 2 diabetes in the Reduction of Endpoints in NIDDM with the Angiotensin II Antagonist Losartan (RENAAL) study. It is unknown whether an insertion (I)/deletion (D) polymorphism in the angiotensin I-converting enzyme (ACE) gene predicts renal outcomes and death and influences the effect of losartan in these patients. Pharmacogenetic analyses were performed comparing losartan with placebo administered with conventional blood pressure-lowering therapy in 1435 (95%) of the 1513 RENAAL study patients. The primary endpoint was the composite of doubling of baseline serum creatinine concentration, end-stage renal disease (ESRD) or death. Cox regression models were stratified on baseline proteinuria and included treatment, geographic region, ACE/ID genotype, and treatment x genotype interaction. Within the placebo group, subjects with the ID or DD genotype were more likely than those with the II genotype to reach the composite endpoint (by 17.5% and 38.1%, respectively, P = 0.029) or its individual components. Within the losartan group, genotype did not correlate with reaching the composite endpoint. Compared with placebo, however, losartan reduced the risk of reaching the composite endpoint by 5.8% (95% confidence interval, -23.3, 28.0), 17.6% (3.8, 29.4), and 27.9% (7.0, 44.1) among those with the II, ID, and DD genotypes, respectively. Similar trends were demonstrated for the individual endpoints. In conclusion, proteinuric type 2 diabetic patients with the D allele of the ACE gene have an unfavorable renal prognosis, which can be mitigated and even improved by losartan.