We now know that the rate of progression of diabetic nephropathy, like all progressive renal disease, correlates with the degree of corticointerstitial fibrosis. Therefore, much interest has focused on the contribution of the resident cells in the renal cortex to this process. This article reviews the evidence that the epithelial cells of the proximal tubule are major players in orchestrating events in the corticointerstitium in diabetic nephropathy. More specifically, it addresses their role in extracellular matrix turnover, generation of cytokines, and recruitment of inflammatory cells, as well as examining the concept that they are the source of the interstitial myofibroblasts, which are the principal mediators of the fibrotic process.