Diabetic nephropathy is the leading cause of end-stage renal disease in the United States and is a major contributing cause of morbidity and mortality in patients with diabetes. Despite conventional therapy to improve glycemic and blood pressure control the incidence of diabetic nephropathy is reaching epidemic proportions worldwide. As the major pathologic feature of diabetic nephropathy is diffuse mesangial matrix expansion, the pro-sclerotic cytokine transforming growth factor-beta, TGF-beta, is a leading candidate to mediate the progression of the disease. Numerous studies have now demonstrated that TGF-beta is a key factor in experimental models of diabetic kidney disease as well as in patients with diabetic nephropathy. Recent studies have begun to explore the mechanisms by which TGF-beta is stimulated by high glucose and how TGF-beta exerts its matrix-stimulating effects on renal cells. TGF-beta may also be involved in mediating the vascular dysfunction of diabetic kidney disease via its effects on the key intracellular calcium channel, the inositol trisphosphate receptor (IP(3)R). As there is substantial evidence for a cause and effect relationship between upregulation of TGF-beta and the progression of diabetic kidney disease, future studies will seek to establish specific targets along these pathways at which to intervene.