Studies using either angiotensin-converting enzyme inhibitors or type 1 (AT(1)) angiotensin II (ANG II)-receptor blockers indicate that ANG II is a mediator of progressive injury in diabetic nephropathy. However, suppression of the systemic renin-angiotensin system (RAS) generally has been shown in diabetes mellitus. Evidence suggests that intrarenal RASs within glomeruli and proximal tubules may be activated with hyperglycemia, leading to stimulation of local ANG II production, which may exert feedback inhibition of systemic renin release. Once formed, intrarenal ANG II exerts most of its well-described effects through binding to AT(1) receptors that are abundantly present in cells of the glomeruli, tubules, vasculature, and interstitium. Thus, AT(1)-receptor activation increases vascular resistance, reduces renal blood flow, and stimulates production of extracellular matrix in the mesangium and tubulointerstitium. Recent studies suggest that the adult kidney also expresses type 2 (AT(2)) ANG II receptors in glomeruli, tubular segments, and vasculature. AT(2)-receptor activation is associated with increased intrarenal nitric oxide production, stimulation of natriuresis, and inhibition of cell growth and matrix synthesis, effects that oppose those of kidney AT(1) receptors. A number of studies have shown a reduction in kidney AT(1)-receptor expression in diabetic nephropathy, suggesting that the balance between AT(1)- and AT(2)-receptor-mediated cell-signaling events may be a determinant of progression rate in diabetic nephropathy and that unopposed stimulation of AT(2) receptors by ANG II with use of AT(1)-receptor blockers may contribute to the beneficial properties of these agents. Determination of the expression pattern of AT(2) receptors in diabetes and further definition of the role of AT(2) receptors in opposing the detrimental effects of AT(1) receptors may lead to more selective targeting of the RAS in diabetic nephropathy.