Diabetic nephropathy is the leading and possibly the most devastating complication of diabetes, with a prevalence ranging from 25 to 40 % in diabetic individuals, and as such represents an important challenge for public health worldwide. As a major cause of end-stage renal disease, diabetic nephropathy also accounts for a large proportion of deaths in diabetic individuals. To date, therapeutic options for overt diabetic nephropathy include medical interventions to reduce blood glucose levels and to control blood pressure and proteinuria. Recent evidence suggests a strong role for inflammation in the development and progression of diabetic nephropathy. Various immune cells, cytokines and chemokines have been implicated in the onset of diabetic nephropathy, while immune-related transcription factors and adhesion molecules have been correlated with the establishment of a renal proinflammatory microenvironment. Both inflammation and immune activation may promote severe distress in the kidney, with subsequent increased local fibrosis, ultimately leading to the development of end-stage renal disease. Stem cells are undifferentiated cells capable of regenerating virtually any organ or tissue and bearing important immunoregulatory and anti-inflammatory properties. Due to the aforementioned considerations, significant interest has been ignited with regard to the use of stem cells as novel therapeutics for diabetic nephropathy. Here, we will be examining in detail how anti-inflammatory properties of different populations of stem cells may offer novel therapy for the treatment of diabetic nephropathy.