The pathophysiology and natural history of diabetic nephropathy are described, and recent developments in its prevention and treatment are discussed. Diabetic nephropathy can occur in both insulin-dependent and non-insulin-dependent diabetics. It is characterized by arterial hypertension, proteinuria, and progressive loss of renal function. Although the exact mechanism has not been fully elucidated, hyperglycemia with altered intraglomerular hemodynamics is an important contributor to the initiation and progression of the disease. Concurrent hypertension aggravates progression of the disease. Currently accepted strategies to slow the progression of diabetic renal disease have focused on antihypertensive therapy, strict glucose control, and restriction of dietary proteins. Recent publications support the hypothesis that angiotensin-converting-enzyme inhibitors have a unique ability, independent of their antihypertensive effect, to slow the progression of diabetic nephropathy. Investigational agents (e.g., aminoguanidine) may prove helpful in the management of the condition. Information about the prevention of diabetic nephropathy has grown significantly in the past few years.