A functionally active endocannabinoid system is present within the kidney. The cannabinoid receptor type 2 (CB2) is expressed by both inflammatory cells and podocytes, and its activation has beneficial effects in experimental diabetic nephropathy. To further explore the role of CB2 in diabetic nephropathy, we studied renal functional and structural abnormalities in streptozotocin-induced diabetic CB2 knockout mice. In diabetic mice, deletion of the CB2 receptor albuminuria, the downregulation of podocin and nephrin, mesangial expansion, overexpression of extracellular matrix components, monocyte infiltration, and reduced renal function were all exacerbated. To investigate the relative contributions of podocytes and monocytes to the phenotype of diabetic knockout mice, bone marrow transplantation experiments were performed. The lack of CB2 on bone marrow-derived cells was shown to be important in driving the enhanced glomerular monocyte accrual found in diabetic knockout mice. Absence of CB2 on resident glomerular cells had a major role in worsening diabetic nephropathy, both functional and structural abnormalities, likely by enhanced MCP-1 and CB1 signaling. Studies in cultured podocytes demonstrated that CB2 expression is not altered by a high glucose milieu but is downregulated by mechanical stretch, mimicking glomerular capillary hypertension. Thus, CB2 deletion worsens diabetic nephropathy, independent of bone marrow-derived cells.