Erythropoietin (EPO) is a haematopoietic cytokine, mainly generated in the renal cortex, and its secretion and action is impaired in chronic kidney disease (CKD). Early renal damage in diabetes mellitus (DM) is usually not detected because diabetes-induced nephron hypertrophy maintains glomerular filtration rate (GFR) and an elevated plasma creatinine concentration is a relatively late manifestation of diabetic nephropathy. However, anaemia occurs more frequently in subjects with DM when compared with those with non-DM renal disease. While reduced production and a blunted response to EPO occurs in DM with early renal damage, other factors including chronic inflammation, autonomic neuropathy and iron deficiency are also important. Although recombinant human erythropoietin (rhEPO) has been an effective therapeutic agent in CKD anaemia, it appears to be more effective in patients with DM, even in earlier stages. Nevertheless, patients with DM are also more likely to be iron deficient, a barrier to effective rhEPO therapy. The effect of treatment on the reliability of haemoglobin A(1c) as an index of glycaemic control must be remembered. It is proposed that anaemia and its causes must be important components of care in subjects with early diabetic renal damage.