In experimental animal studies, tumour necrosis factor-α (TNF-α) contributed to renal hypertrophy during diabetes, and antibodies against TNF-α have led to improved histological lesions in animals with nephrotoxicity and diabetic nephropathy. We aimed to evaluate TNF-α system activity in association with renal histology in patients with type 2 diabetes. This is a prospective, cross-sectional study of 22 patients with type 2 diabetes (16 men), 13 with microalbuminuria and 9 with normoalbuminuria. Plasma-soluble TNF-α receptor 1 and 2 (sTNFR1 and sTNFR2) concentrations were used as surrogates of TNF-α system activity. Glomerular filtration rate (GFR) was analysed using I(125)-Iodothalamine. Albumin excretion rate (AER) and a renal biopsy were performed in all subjects. AER did not associate significantly with mesangial expansion or interstitial fraction in these subjects (r < 0.12, P > 0.5). AER was also not associated with either sTNFR1 or sTNFR2 levels. However, after controlling for GFR, the correlation between AER and sTNFR1 became significant (r = 0.47, P = 0.03). sTNFR1 correlated with age (r = 0.65, P < 0.001), mesangial expansion (r = 0.59, P = 0.004) and interstitial fraction (r = 0.58, P = 0.005). After controlling for age, body mass index and blood pressure, the association of TNFR1 with mesangial expansion persisted significant. Circulating sTNFR2 concentrations were not significantly associated with histological changes. In summary, structural kidney damage in patients with type 2 diabetes is associated with TNF-α system activity and specifically with plasma sTNFR1 concentrations.