The crucial pathology underlying progressive chronic kidney disease in diabetes is tubulointerstitial fibrosis. Central to this process is epithelial-mesenchymal transformation (EMT) of proximal tubular epithelial cells driven by maladaptive transforming growth factor-beta1 (TGF-beta1) signaling. Novel signaling roles for C-peptide have recently been discovered with evidence emerging that C-peptide may mitigate microvascular complications of diabetes. We studied the potential for C-peptide to interrupt injurious TGF-beta1 signaling pathways and thus block development of EMT in HK2 human kidney proximal tubular cells. Cells were incubated with TGF-beta1 either alone or with C-peptide in low or high glucose. Changes in cell morphology, TGF-beta1 receptor expression, vimentin, E-cadherin, and phosphorylated Smads were assessed. Luciferase reporters were used to assess Smad activity. The cytoskeleton was visualized by TRITC-phalloidin staining. The typical TGF-beta1-stimulated, EMT-associated morphological alterations of proximal tubular cells, including increased vimentin expression, decreased E-cadherin expression, and cytoskeletal rearrangements, were prevented by C-peptide treatment. C-peptide also blocked TGF-beta1-induced upregulation of expression of both type I and type II TGF-beta1 receptors and attenuated TGF-beta1-mediated Smad phosphorylation and Smad transcriptional activity. These effects of C-peptide were inhibited by pertussis toxin. The results demonstrate that C-peptide almost completely reversed the morphological changes in PT cells induced by TGF-beta1 and suggest a role or C-peptide as a renoprotective agent in diabetic nephropathy.