Diabetic nephropathy is the leading cause of kidney disease in patients starting renal replacement therapy and affects ~30% of type 1 and type 2 diabetic patients. This review focuses on the progression and pathophysiological aspects of the condition. The natural history of diabetic nephropathy is characterized by specific renal morphological and functional alterations. Features of early diabetic renal changes are microalbuminuria (30-300mg/day), glomerular hyperfiltration, glomerular and renal hypertrophy, increased basement membrane thickness, and mesangial expansion with the accumulation of extracellular matrix proteins such as collagen, fibronectin, and laminin. Advanced diabetic nephropathy is characterized by macroalbuminuria (>300mg/day), a progressive decline in glomerular filtration rate, decreasing creatinine clearance, glomerulosclerosis, and interstitial fibrosis. Although poor glycemic control is an important risk factor, glycemia does not fully explain why only a subset of diabetic patients progress to end stage renal disease. Several decades of extensive research has elucidated various pathways to be implicated in the development of diabetic kidney disease such as systemic and glomerular hypertension, advanced glycation endproducts and the aldose reductase system. Furthermore, hemodynamic factors, the reninangiotensin system, the endothelin system, the intracellular signaling molecule protein kinase C, transforming growth factor-ß, growth hormone, insulin like growth factors, vascular endothelial growth factor, and platelet-derived growth factor are believed to be involved in the pathogenesis. Thus, there are clearly many points at which therapeutic approaches could be tried to provide renoprotection in diabetes. It is likely that due to its complexity, targeting multiple points in altered metabolism in the diabetic kidney will be more successful in attenuating the development of diabetic nephropathy, rather than a single approach.