Diabetic kidney disease (DKD) is a major complication for diabetic patients. Adiponectin is an insulin sensitizer and anti-inflammatory adipokine and is mainly secreted by adipocytes. Two types of adiponectin receptors, AdipoR1 and AdipoR2, have been identified. In both type 1 and type 2 diabetes (T2D) patients with DKD, elevated adiponectin serum levels have been observed, and adiponectin serum level is a prognostic factor of end-stage renal disease. Renal insufficiency and tubular injury possibly play a contributory role in increases in serum and urinary adiponectin levels in diabetic nephropathy by either increasing biodegradation or elimination of adiponectin in the kidneys, or enhancing production of adiponectin in adipose tissue. Increases in adiponectin levels resulted in amelioration of albuminuria, glomerular hypertrophy, and reduction of inflammatory response in kidney tissue. The renoprotection of adiponectin is associated with improvement of the endothelial dysfunction, reduction of oxidative stress, and upregulation of endothelial nitric oxide synthase expression through activation of adenosine 5'-monophosphate-activated protein kinase by AdipoR1 and activation of peroxisome proliferator-activated receptor (PPAR)-α signaling pathway by AdipoR2. Several single nucleotide polymorphisms in the AdipoQ gene, including the promoter, are associated with increased risk of the development of T2D and DKD. Renin-angiotensin-aldosterone system blockers, adiponectin receptor agonists, and PPAR agonists (e.g., tesaglitazar, thiazolidinediones, fenofibrate), which increase plasma adiponectin levels and adiponectin receptors expression, may be potential therapeutic drugs for the treatment of DKD.