Impaired nutrient sensing mechanisms such as AMPK/silent information regulator type 1 (SIRT1) axis and autophagy in renal cells upon chronic diabetic condition accelerate renal injury and upregulating these mechanisms has been reported to prevent renal damage. Melatonin, a neuroendocrine agent, also possess antioxidant and AMPK modulatory effect. In the current study, the protective effect of melatonin against diabetic renal injury was assessed in streptozotocin‐induced diabetic nephropathy model and in in vitro model of high‐glucose‐induced tubular injury. Melatonin (3 and 10 mg/kg) was administered for 28 days after 4 weeks of diabetes induction in Sprague–Dawley rats. For in vitro model, the NRK‐52E cells were co‐incubated with high glucose and melatonin (25 and 50 μM). Melatonin supplementation abrogated the diabetes‐induced renal injury and improved renal function in diabetic rats. Immunoblot analysis of renal tissue lysates revealed improved expression of AMPK, as well as upregulated the expression of nuclear factor erythroid 2‐related factor 2, SIRT1, PGC‐1α, TFAM and enhanced autophagy upon melatonin treatment in diabetic rats. Likewise, melatonin treatment in high glucose exposed NRK‐52E cells improved expression of AMPK, enhanced mitochondrial biogenesis and positively modulated autophagy. However, these effects were repressed upon inhibition of AMPK activity in NRK‐52E cells by treatment of Compound‐C, suggesting that the protective effects of melatonin were mainly mediated through activation of AMPK. These results suggest that melatonin might mediate the renoprotective effect by upregulating the AMPK/SIRT1 axis, enhancing the autophagy and mitochondrial health in DIabetic Nephropathy.