Angiotensin-converting enzyme 2 (ACE2) is a monocarboxypeptidase capable of metabolizing angiotensin (Ang) II into Ang 1 to 7. We hypothesized that ACE2 is a negative regulator of Ang II signaling and its adverse effects on the kidneys. Ang II infusion (1.5 mg/kg⁻¹/d⁻¹) for 4 days resulted in higher renal Ang II levels and increased nicotinamide adenine dinucleotide phosphate oxidase activity in ACE2 knockout (Ace2(-/y)) mice compared to wild-type mice. Expression of proinflammatory cytokines, interleukin-1β and chemokine (C-C motif) ligand 5, were increased in association with greater activation of extracellular-regulated kinase 1/2 and increase of protein kinase C-α levels. These changes were associated with increased expression of fibrosis-associated genes (α-smooth muscle actin, transforming growth factor-β, procollagen type Iα1) and increased protein levels of collagen I with histological evidence of increased tubulointerstitial fibrosis. Ang II-infused wild-type mice were then treated with recombinant human ACE2 (2 mg/kg⁻¹/d⁻¹, intraperitoneal). Daily treatment with recombinant human ACE2 reduced Ang II-induced pressor response and normalized renal Ang II levels and oxidative stress. These changes were associated with a suppression of Ang II-mediated activation of extracellular-regulated kinase 1/2 and protein kinase C pathway and Ang II-mediated renal fibrosis and T-lymphocyte-mediated inflammation. We conclude that loss of ACE2 enhances renal Ang II levels and Ang II-induced renal oxidative stress, resulting in greater renal injury, whereas recombinant human ACE2 prevents Ang II-induced hypertension, renal oxidative stress, and tubulointerstitial fibrosis. ACE2 is an important negative regulator of Ang II-induced renal disease and enhancing ACE2 action may have therapeutic potential for patients with kidney disease.