A significant subgroup of patients with diabetes mellitus are predisposed to developing diabetic nephropathy and it is in this subgroup that other diabetes- related complications, and in particular greatly increased cardiovascular disease risk, are concentrated. The high personal, social and financial costs of managing end-stage renal failure and the other complications associated with diabetic nephropathy make a powerful case for screening and effective intervention programmes to prevent the condition or retard its progression. As major breakthroughs in finding genetic susceptibility factors remain elusive, screening efforts continue to be based on microalbuminuria testing, despite increasing recognition of its limitations as a positive predictor of nephropathy. Interventions have been extensively studied, but results remain conflicting. Economic evaluations of such screening and intervention programmes are essential for health planners, yet models of the cost/benefit ratio of such interventions often rely on a rather slim evidence base. Where economic models are developed, they are frequently based on those papers that propound the greatest clinical benefits of a given intervention, leading to a possible over-estimation of the advantages of the chosen approach. Furthermore, the benefits of even such generally accepted interventions as ACE inhibitor treatment are less firmly established than generally appreciated. Lifestyle interventions are instinctively attractive, but are by no means a low-cost option (as is often assumed by both medical professionals and politicians). This review critically assesses the evidence for clinical efficacy and economic benefit of microalbuminuria screening and interventions such as intensive glycaemic control, antihypertensive treatment, ACE inhibition and angiotensin receptor blockade, dietary protein restriction and lipid-modifying therapy. The various costs associated with diabetic nephropathy are so great that even expensive interventions may have a favourable cost/benefit ratio, provided they are truly effective.