Diabetic nephropathy is a major cause of morbidity and mortality in patients with diabetes; it occurs in about one third of such patients. The course of nephropathy is better defined and similar for both type 1 and type 2 diabetes. Patients initially develop microalbuminuria (albumin excretion rates [AERs] between 20 and 200 micrograms/min), then overt nephropathy (AER > or = 200 micrograms/min), and finally a decline in glomerular filtration rate (GFR) eventuating in end-stage renal disease. Although metabolic control has long been hypothesized as a contributor to the development of nephropathy, it is only in recent years that this hypothesis has been proven. A number of observational studies have shown correlations between glycemic control and the development of various levels of albuminuria and also declines in GFR. However, large long-term prospective, randomized, interventional studies have now definitely proven that improved metabolic control that achieves near-normoglycemia can significantly decrease the development and progression of diabetic nephropathy as well as other long-term complications of diabetes, including retinopathy and neuropathy. It is now conceivable that the achievement of near-normoglycemia, plus medications that inhibit the renin-angiotensin system if microalbuminuria develops, may greatly decrease the numbers of patients eventually requiring renal replacement therapy.