Decorin, a proteoglycan that inhibits active transforming growth factor-beta, is increased in diabetic nephropathy; however, its functional significance is unclear. In this study, we used low-dose streptozotocin to induce type 1 diabetes in wild-type (C57BL/6J Dcn(+/+)), Dcn(-/-), and Dcn(+/-) mice and studied the mice for up to 1 year of diabetes. Decorin gene dose had no effect on severity of diabetes; however, the Dcn(-/-) diabetic mice died significantly earlier than nondiabetic controls (57 versus 7.3% mortality). In contrast to wild-type diabetic mice, which failed to develop significant nephropathy, the Dcn(-/-) diabetic mice developed a significant increase in albuminuria and plasma creatinine and a concurrent decrease in circulating adiponectin levels. Interestingly, adiponectin levels at 6 months of diabetes were predictive of mortality in diabetic mice. Dcn(-/-) diabetic mice exhibited advanced glomerular lesions, including diffuse mesangial matrix accumulation and fibrin cap formation. By immunohistochemistry, Dcn(-/-) diabetic mice exhibited significant increases in glomerular transforming growth factor-beta, type I collagen, macrophage infiltration, and Nox4. We conclude that decorin is a natural protective factor against diabetic nephropathy and that the Dcn(-/-) diabetic mouse is a useful new model of progressive diabetic nephropathy.