The molecular pathogenesis of diabetic nephropathy (DN), the leading cause of end-stage renal disease worldwide, is complex and not fully understood. Transforming growth factor-beta (TGF-beta1) plays a critical role in many fibrotic disorders, including DN. In this study, we report protein kinase B (PKB/Akt) activation as a downstream event contributing to the pathophysiology of DN. We investigated the potential of PKB/Akt to mediate the profibrotic bioactions of TGF-beta1 in kidney. Treatment of normal rat kidney epithelial cells (NRK52E) with TGF-beta1 resulted in activation of phosphatidylinositol 3-kinase (PI3K) and PKB/Akt as evidenced by increased Ser473 phosphorylation and GSK-3beta phosphorylation. TGF-beta1 also stimulated increased Smad3 phosphorylation in these cells, a response that was insensitive to inhibition of PI3K or PKB/Akt. NRK52E cells displayed a loss of zona occludins 1 and E-cadherin and a gain in vimentin and alpha-smooth muscle actin expression, consistent with the fibrotic actions of TGF-beta1. These effects were blocked with inhibitors of PI3K and PKB/Akt. Furthermore, overexpression of PTEN, the lipid phosphatase regulator of PKB/Akt activation, inhibited TGF-beta1-induced PKB/Akt activation. Interestingly, in the Goto-Kakizaki rat model of type 2 diabetes, we also detected increased phosphorylation of PKB/Akt and its downstream target, GSK-3beta, in the tubules, relative to that in control Wistar rats. Elevated Smad3 phosphorylation was also detected in kidney extracts from Goto-Kakizaki rats with chronic diabetes. Together, these data suggest that TGF-beta1-mediated PKB/Akt activation may be important in renal fibrosis during diabetic nephropathy.