The mechanisms that drive the development of diabetic nephropathy remain undetermined. Only 30-40% of patients with diabetes mellitus develop overt nephropathy, which suggests that other contributing factors besides the diabetic state are required for the progression of diabetic nephropathy. Endothelial dysfunction is associated with human diabetic nephropathy and retinopathy, and advanced diabetic glomerulopathy often exhibits thrombotic microangiopathy, including glomerular capillary microaneurysms and mesangiolysis, which are typical manifestations of endothelial dysfunction in the glomerulus. Likewise, diabetic mice with severe endothelial dysfunction owing to deficiency of endothelial nitric oxide synthase develop progressive nephropathy and retinopathy similar to the advanced lesions observed in humans with diabetes mellitus. Additionally, inhibitors of the renin-angiotensin system fail to be renoprotective in some individuals with diabetic nephropathy (due in part to aldosterone breakthrough) and in some mouse models of the disease. In this Review, we discuss the clinical and experimental evidence that supports a role for endothelial nitric oxide deficiency and subsequent endothelial dysfunction in the progression of diabetic nephropathy and retinopathy. If endothelial dysfunction is the key factor required for diabetic nephropathy, then agents that improve endothelial function or raise intraglomerular nitric oxide level could be beneficial in the treatment of diabetic nephropathy.