Diabetic nephropathy is the most common and most rapidly growing cause of end-stage renal failure in developed countries. Diabetic nephropathy results from complex interactions between genetic, metabolic and hemodynamic factors. Improvements in our understanding of the pathogenesis of fibrosis associated with diabetic kidney disease have led to the identification of several novel targets for the treatment of diabetic nephropathy. Albuminuria is a useful clinical marker of diabetic nephropathy, as it can be used to predict a decline in renal function. A reduction in albuminuria might not, however, be reflective of a protective effect of therapies focused on ameliorating renal fibrosis. Although new strategies for slowing down the progression of several types of renal disease have emerged, the challenge of arresting the relentless progression of diabetic nephropathy remains. In this Review, we discuss novel pharmacological approaches that aim to improve the renal outcomes of diabetic nephropathy, including the use of direct renin inhibitors and statins. We also discuss the promise of using antifibrotic agents to treat diabetic nephropathy. The need for novel biomarkers of diabetic nephropathy is also highlighted.