End-stage renal failure secondary to diabetes has increasingly become a health and socioeconomic issue. Diabetic nephropathy is the major cause of death in type I insulin-dependent diabetic patients and accounts for ∼25% of all patients beginning hemodialysis in the United States. Once diabetic nephropathy is well established, attempts to modify the relentless downward progression of the disease have been essentially unsuccessful. We focus on the early structural and functional changes that occur as a consequence of diabetic renal disease and examine the evidence for microalbuminuria as an early marker and predictor for future overt diabetic nephropathy. The rationale for different therapeutic interventions to alter the course of early diabetic nephropathy are discussed.