Diabetic kidney disease (DKD) is the most common cause of kidney failure in the world, and novel predictive biomarkers and molecular mechanisms of disease are needed. Endothelial cell-specific molecule-1 (Esm-1) is a secreted proteoglycan that attenuates inflammation. We previously identified that a glomerular deficiency of Esm-1 associates with more pronounced albuminuria and glomerular inflammation in DKD-susceptible relative to DKD-resistant mice, but its contribution to DKD remains unexplored. In this study, we show that lower circulating Esm-1 predicts progressive stages of albuminuria in patients with diabetes. In DKD-susceptible mice, Esm-1 inversely correlates with albuminuria and glomerular leukocyte infiltration. Using hydrodynamic tail-vein injection, we show that over-expression of either mouse or human Esm-1 reduces diabetes-induced albuminuria relative to saline-injected controls independent of leukocyte infiltration. Using a complementary approach, we find that constitutive deletion of Esm-1 in DKD-resistant mice increases the degree of diabetes-induced albuminuria versus wild-type controls. Mechanistically, over-expression of Esm-1 attenuates diabetes-induced podocyte injury. By glomerular RNAseq, we identify that Esm-1 attenuates diabetes-induced up-regulation of interferon-stimulated genes, and Esm-1 inhibits expression of kidney disease-promoting and interferon-related genes, including Ackr2 and Cxcl11. In conclusion, we demonstrate that Esm-1 protects against diabetes-induced albuminuria, and podocytopathy, possibly through select interferon signaling.