Recent evidences indicate that signal transducer and activator of transcription 3 (STAT3) is one of the crucial signaling pathways in the progression of diabetic nephropathy (DN). Here, we investigated the hypothesis that pharmacological blockade of STAT3 limits the progression of DN. Treatment with selective STAT3 inhibitor, S3I-201 for 16 weeks significantly attenuated kidney injuries in streptozotocin (STZ) induced diabetic mice, associated with downregulated expression of TGF-β1, ACE/AT1, and VEGF in diabetic mouse kidneys. Similar results were confirmed using genetic knockdown of STAT3 in mouse kidneys by injections of AAV2 expressing STAT3 shRNA in diabetic mouse. Further, STAT3 localization in kidney tissue was evaluated using immunofluorescent double-staining analysis, which indicated that STAT3 expression was mainly in the tubular epithelial cells. As expected, in renal tubular epithelial NRK-52E cells, high glucose (HG)-induced overexpression of TGF-β1, ACE/AT1, and VEGF were abrogated by S3I-201 pretreatment, as well as by genetic knockdown of STAT3 using specific siRNA sequence. This study found that renal tubular epithelial cells contributed to STAT3-mediated progression of DN and provided the first evidence that pharmacological inhibition of STAT3 attenuates DN.