Diabetic nephropathy is the leading cause of end-stage renal disease in the United States and the largest contributor to the total cost of diabetic care. In addition to the development of diabetic nephropathy and end-stage renal failure, diabetic patients with evidence of albuminuria have a much higher risk of developing myocardial infarctions, cerebrovascular accidents, severe progressive retinopathy, and neuropathy. This article characterizes the clinical and pathologic features of diabetic nephropathy and reviews the major pathogenetic theories that underlie the development of this dreaded complication of diabetes. Widespread screening for this condition and aggressive treatment of diabetic nephropathy at early stages of disease are critical to diminish the risk of costly late complications.