Diabetic nephropathy is a major cause of morbidity and mortality. The exact mechanism mediating the negative influence of hyperglycaemia on renal function remains unclear, although several hypotheses have been postulated. The cellular mechanisms include glucose-induced excessive formation of reactive oxygen species, increased glucose flux through the polyol pathway and formation of advanced glycation end-products. The renal effects in vivo of each and every one of these mechanisms are even less clear. However, there is growing evidence that hyperglycaemia results in altered renal oxygen metabolism and decreased renal oxygen tension and that these changes are linked to altered kidney function. Clinical data regarding renal oxygen metabolism and oxygen tension are currently rudimentary and our present understanding regarding renal oxygenation during diabetes is predominantly derived from data obtained from animal models of experimental diabetic nephropathy. This review will present recent findings regarding the link between hyperglycaemia and diabetes-induced alterations in renal oxygen metabolism and renal oxygen availability. A possible link between reduced renal oxygen tension and the development of diabetic nephropathy includes increased polyol pathway activity and oxidative stress, which result in decreased renal oxygenation and subsequent activation of hypoxia-inducible factors. This initiates increased gene expression of numerous genes known to be involved in development of diabetic nephropathy.