Diabetic kidney disease is a microvascular complication that is observed in a minority of patients with long-standing hyperglycemia. Diabetic nephropathy (DN) is associated with shortened patient survival, severe morbidity, and increased health care costs. Unfortunately, the incidence rates of DN continue to increase in Western societies, and DN is now the most common reported cause of end-stage renal disease in developed nations. DN results from a complex interplay between inherited and environmental factors. This article reviews the data that support an inherited basis for susceptibility to DN by summarizing familial aggregation studies, genome-wide linkage, and population-based association analyses in diabetic and nondiabetic kidney disease. Recent evidence linking genes involved in the regulation of endothelial function with genetic predisposition to albuminuria is presented. The integration of carefully designed genetic linkage and association studies with gene expression experiments in human and animal models of diabetic kidney disease appear to offer great promise for detecting the molecular mechanisms underlying susceptibility to DN.