This review describes the most important recent findings on the role of the renin-angiotensin system and its pharmacologic blockade in diabetic nephropathy. The pathway leading to activation of the renin-angiotensin system is analyzed, with emphasis on systemic and local renal renin-angiotensin systems; included is a discussion of angiotensin II receptors. Hemodynamic as well as nonhemodynamic actions of angiotensin II are presented. Based on evidence for genetic susceptibility to diabetic nephropathy, gene polymorphism is reviewed. Finally, the unique pharmacologic effects of angiotensin converting enzyme inhibitors and evidence for their clinical efficacy in diabetics with nephropathy are reviewed.