Variation in DNA methylation (DNAmet) in white blood cells and other cells/tissues has been implicated in the etiology of progressive diabetic kidney disease (DKD). However, the specific mechanisms linking DNAmet variation in blood cells with risk of kidney failure (KF) and utility of measuring blood cell DNAmet in personalized medicine are not clear. We measured blood cell DNAmet in 277 individuals with type 1 diabetes and DKD using Illumina EPIC arrays; 51% of the cohort developed KF during 7 to 20 years of follow-up. Our epigenome-wide analysis identified DNAmet at 17 CpGs (5'-cytosine-phosphate-guanine-3' loci) associated with risk of KF independent of major clinical risk factors. DNAmet at these KF-associated CpGs remained stable over a median period of 4.7 years. Furthermore, DNAmet variations at seven KF-associated CpGs were strongly associated with multiple genetic variants at seven genomic regions, suggesting a strong genetic influence on DNAmet. The effects of DNAmet variations at the KF-associated CpGs on risk of KF were partially mediated by multiple KF-associated circulating proteins and KF-associated circulating miRNAs. A prediction model for risk of KF was developed by adding blood cell DNAmet at eight selected KF-associated CpGs to the clinical model. This updated model significantly improved prediction performance (c-statistic = 0.93) versus the clinical model (c-statistic = 0.85) at P = 6.62 × 10-14. In conclusion, our multiomics study provides insights into mechanisms through which variation of DNAmet may affect KF development and shows that blood cell DNAmet at certain CpGs can improve risk prediction for KF in T1D.