The development and progression of microvascular complications have been extensively documented in a cohort of type 1 diabetic subjects enrolled in the Diabetes Control and Complications Trial (DCCT) and followed in the Epidemiology of Diabetes Interventions and Complications (EDIC) study. We describe the association of genetic variation in the ACE gene in 1,365 DCCT/EDIC subjects with incident persistent microalbuminuria (n = 312) and severe nephropathy (n = 115). We studied three markers (rs1800764, insertion/deletion, and rs9896208) in the ACE gene that allowed us to capture genetic variation in the common haplotypes occurring at frequencies of >5% in Caucasians. Compared with the more frequent genotype (D/I) for the insertion/deletion polymorphism, in multivariate models, the I/I genotype conferred a lower risk for persistent microalbuminuria (hazard ratio [HR] 0.62 [95% CI 0.43-0.89], P = 0.009) and severe nephropathy (0.56 [0.32-0.96], P = 0.033). Variation at the two other markers, rs1800764 and rs9896208, were also associated with these renal outcomes. In addition, homozygosity for the common haplotype TIC (which corresponded to the T, insertion, and C alleles at the three markers, rs1800764, insertion/deletion, and rs9896208, respectively) versus the CDT/TIC haplotype pair was associated with lower risk for development of persistent microalbuminuria (HR 0.49 [0.32-0.75], P = 0.0009) and severe nephropathy (0.41 [0.22-0.78], P = 0.006). Our findings in the DCCT/EDIC cohort provide strong evidence that genetic variation at the ACE gene is associated with the development of nephropathy in patients with type 1 diabetes.