Chronic inflammation caused by high glucose and high free fatty acid (FFA) concentrations is a major contributor to the pathogenesis of type 2 diabetes. Recent evidence suggests that activation of Toll-like receptor (TLR) signaling induces peripheral insulin resistance and mediates central insulin and leptin resistance. In this study, we investigated the renal effects of TLR4 signaling blockade in type 2 diabetic mice. Eight-week-old db/db mice were treated for 12 weeks with (S,R)-3-phenyl-4,5-dihydro-5-isoxasole acetic acid (GIT27), which targets macrophages through the inhibition of TLR4- and TLR2/6-mediated signaling pathways. Although GIT27 treatment improved glycemic control and insulin tolerance, which is associated with a lower lipid profile, it did not impact body weight or food consumption. GIT27 treatment also markedly decreased urinary albumin excretion, decreased proinflammatory cytokine synthesis, improved tissue lipid metabolism, induced oxidative stress, and improved glomerulosclerosis compared with the control db/db group. In cultured podocytes and adipocytes, high glucose levels with FFA stimulation increased TLR4 expression and proinflammatory cytokine synthesis, but the effects were abolished by GIT27 treatment. In addition, knockdown of TLR4 expression by stealth small interfering RNA abolished FFA-induced proinflammatory cytokine synthesis in cultured podocytes. In conclusion, our results suggest that GIT27 treatment improves insulin resistance and protects against the renal injury that occurs in type 2 diabetic nephropathy through both metabolic and antiglomerulosclerotic mechanisms. These results suggest that TLR pathway inhibition might play a direct protective role in diabetic kidney disease.