Renal hypertrophy and deposition of extracellular matrix proteins are consistent findings in diabetic nephropathy and these processes can be halted or reversed by euglycemic control. Using DNA microarray analysis of glomerular RNA from control and diabetic rats we found that the expression levels of insulin-like growth factor 1 receptor (IGF-1R) were increased while those of suppressor of cytokine signaling 2 (SOCS2) and STAT5 were decreased. All of these changes were normalized by islet cell transplantation. Overexpression of SOCS2 in rat mesangial cells inhibited IGF-1-induced activation of extracellular signal-regulated kinase, which subsequently reduced type IV collagen and DNA synthesis, an effect due to interaction of SOCS2 with IGF-1R. Inhibition of SOCS2 overexpression by small interfering RNA suppressed IGF-1R-mediated actions by preventing phosphorylation of tyrosine 317 in the p66Shc adaptor protein; however, overexpression of either SOCS1 or SOCS3 did not affect IGF-1R signaling. Insulin directly increased STAT5 and SOCS2 expression in mesangial cells. This study shows that insulin can inhibit the mitogenic action of IGF-1 in mesangial cells by regulating STAT5/SOCS2 expression. Insulin deficiency may contribute to the mesangial expansion found in diabetes through reduced STAT5/SOCS2 expression.