Our previous study showed that proteasomal inhibitor MG132 can prevent diabetic nephropathy (DN) along with upregulation of nuclear factor (erythroid-derived 2)-like 2 (Nrf2). The present study was to investigate whether MG132 can prevent DN in wild-type and Nrf2-KO mice. Type 1 diabetes was induced in wild-type and Nrf2-KO mice by multiple low doses of streptozotocin. Two weeks after streptozotocin injection, both wild-type and Nrf2-KO mice were randomly divided into four groups: control, MG132, DM, and DM/MG132. MG132 (10 μg/kg/day) or vehicle was administered intraperitoneally for 4 months. Renal function, morphology, and biochemical changes were measured after 4-month treatment with MG132. MG132 treatment suppressed proteasomal activity in the two genotypes. In wild-type mice, MG132 attenuated diabetes-induced renal dysfunction, fibrosis, inflammation, and oxidative damage along with increased Nrf2 and IκB expression. Deletion of Nrf2 gene resulted in a partial, but significant attenuation of MG132 renal protection in Nrf2-KO mice compared with wild-type mice. MG132-increased IκB expression was not different between wild-type and Nrf2-KO mice. This work indicates that MG132 inhibits diabetes-increased proteasomal activity, resulting in Nrf2 and IκB upregulation and renal protection, which could be used as a strategy to prevent diabetic nephropathy.