Since the functional role(s) of angiotensin II (Ang II) type II receptor (AT(2)R) in type I diabetes is unknown, we hypothesized that AT(2)R is involved in decreasing the effects of type I diabetes on the kidneys. We induced diabetes with low-dose streptozotocin (STZ) in both AT(2)R knockout (AT(2)RKO) and wild-type (WT) male mice aged 12 weeks and followed them for 4 weeks. Three subgroups nondiabetic, diabetic, and insulin-treated diabetic (Rx insulin implant) were studied. Systolic blood pressure (SBP), physiological parameters, glomerular filtration rate (GFR), renal morphology, gene expression, and apoptosis were assessed. After 4 weeks of diabetes, compared to WT controls, AT(2)RKO mice clearly developed features of early diabetic nephropathy (DN), such as renal hypertrophy, tubular apoptosis, and progressive extracellular matrix (ECM) protein accumulation as well as increased GFR. AT(2)RKO mice presented hypertension unaffected by diabetes. Renal oxidative stress (measured as heme oxygenase 1 (HO-1) gene expression and reactive oxygen species (ROS) generation) and intrarenal renin angiotensin system components, such as angiotensinogen (Agt), AT(1)R, and angiotensin-converting enzyme (ACE) gene expression, were augmented whereas angiotensin-converting enzyme2 (ACE2) gene expression was decreased in renal proximal tubules (RPTs) of AT(2)RKO mice. The renal changes noted above were significantly enhanced in diabetic AT(2)RKO mice but partially attenuated in insulin-treated diabetic WT and AT(2)RKO mice. In conclusion, AT(2)R deficiency accelerates the development of DN, which appears to be mediated, at least in part, via heightened oxidative stress and ACE/ACE2 ratio in RPTs.