Diabetic nephropathy is a leading cause of end-stage renal failure worldwide. Its morphologic characteristics include glomerular hypertrophy, basement membrane thickening, mesangial expansion, tubular atrophy, interstitial fibrosis and arteriolar thickening. All of these are part and parcel of microvascular complications of diabetes. A large body of evidence indicates that oxidative stress is the common denominator link for the major pathways involved in the development and progression of diabetic micro- as well as macro-vascular complications of diabetes. There are a number of macromolecules that have been implicated for increased generation of reactive oxygen species (ROS), such as, NAD(P)H oxidase, advanced glycation end products (AGE), defects in polyol pathway, uncoupled nitric oxide synthase (NOS) and mitochondrial respiratory chain via oxidative phosphorylation. Excess amounts of ROS modulate activation of protein kinase C, mitogen-activated protein kinases, and various cytokines and transcription factors which eventually cause increased expression of extracellular matrix (ECM) genes with progression to fibrosis and end stage renal disease. Activation of renin-angiotensin system (RAS) further worsens the renal injury induced by ROS in diabetic nephropathy. Buffering the generation of ROS may sound a promising therapeutic to ameliorate renal damage from diabetic nephropathy, however, various studies have demonstrated minimal reno-protection by these agents. Interruption in the RAS has yielded much better results in terms of reno-protection and progression of diabetic nephropathy. In this review various aspects of oxidative stress coupled with the damage induced by RAS are discussed with the anticipation to yield an impetus for designing new generation of specific antioxidants that are potentially more effective to reduce reno-vascular complications of diabetes.