Recently, we reported the presence of a local renal aldosterone production. In the present study, we tested the hypothesis that local aldosterone production in the kidney contributes to renal inflammation, matrix formation and albuminuria associated with diabetes. We evaluated changes in renal aldosterone content (RAC), aldosterone synthase expression, nuclear factor kappaB (NFkappaB), tumour necrosis factor alpha (TNFalpha), interleukin-6 (IL-6), transforming growth factor beta (TGFbeta), glomerular fibronectin, collagen type IV and urinary albumin extraction (UAE) in response to the aldosterone synthase inhibitor FAD286. Studies were conducted in adrenalectomized, normoglycaemic (control) or diabetic rats for 14 weeks. The FAD286 was administered during the last 10 weeks of the study. Plasma aldosterone levels were not detectable in any of the study groups. Compared with control rats, diabetic rats had higher levels of RAC by 488% (P < 0.01), NFkappaB by 293% (P < 0.01), TNFalpha by 356% (P < 0.01), IL-6 by 378% (P < 0.01), TGFbeta by 337% (P < 0.01) and UAE by 1122% (P < 0.01), and increased glomerular fibronectin and collagen type IV immunostaining. In diabetic rats, FAD286 reduced RAC (P < 0.01), UAE (P < 0.05), NFkappaB mRNA, TNFalpha mRNA, IL-6 mRNA and TGFbeta mRNA by 51, 41, 41 and 52% and also their proteins and decreased glomerular fibronectin and collagen type IV immunostaining. In conclusion, diabetes increases local aldosterone production in the kidney, which contributes to development of renal inflammation, matrix formation and albuminuria. Inhibition of aldosterone production in the kidney could be helpful in management of diabetic nephropathy.