Angiotensin-converting enzyme (ACE) 2 is a homologue of ACE with enzymatic activity that seems to counterbalance the angiotensin II-promoting effect of ACE. While ACE promotes angiotensin (Ang) II formation from Ang I, ACE2 degrades Ang II and Ang I. In this review, we discuss recent studies that have delineated the localization of ACE2 within the kidney, an organ that highly expresses this enzyme. In models of diabetic kidney, pharmacological ACE2 inhibition is associated with albuminuria and worsening of glomerular injury. Similarly, genetic ablation of ACE2 causes glomerular lesions in male mice and worsens the renal lesions seen in diabetic Akita mice. Taken together, these findings suggest that a decrease in ACE2 may be involved in diabetic kidney disease, possibly by disrupting the metabolism of angiotensin peptides in such a way that angiotensin II degradation within the glomerulus may be diminished.