The developmental mechanism of tubulointerstitial fibrosis in diabetic nephropathy (DN) has not been elucidated. Tubulointerstitial fibrosis, as well as glomerulosclerosis, occurs in DN. Myofibroblasts which overproduce extracellular matrix are present in the renal interstitium in diabetics, although they are almost never seen in normal kidneys. The myofibroblasts appear to originate from interstitial fibroblasts. In addition, transforming growth factor-beta1 (TGF-beta 1), which can evoke myofibroblast transformation, is detected in interstitial cells in the diabetic kidney, but not in the normal kidney. Taken together, these findings led us to speculate that TGF-beta 1 induces the transformation of interstitial fibroblasts into myofibroblasts, followed by tubulointerstitial fibrosis. Based on this speculation, we discuss the developmental mechanism of tubulointerstitial fibrosis in this review.