Diabetic nephropathy (DN) is a major diabetic complication that is mediated by transforming growth factor (TGF)-β1 via Smad-dependent and -independent signalling pathways. Under diabetic conditions, many profibrotic factors, such as advanced glycation end-products and angiotensin II, can also activate the Smad signalling pathway via the extracellular signal-regulated kinase/p38 mitogen-activated protein kinase-Smad signalling cross-talk pathway. Thus, Smads act as signal integrators and interact with other signalling pathways to mediate DN. In the context of renal fibrosis, Smad3 is pathogenic, but Smad2 is protective. Deletion of Smad3 inhibits, whereas disruption of Smad2 upregulates, connective tissue growth factor and vascular endothelial growth factor expression and promotes both epithelial-myofibroblast and endothelial-myofibroblast transition. Smad7 plays a protective role in DN because deletion of Smad7 enhances, whereas overexpression of Smad7 inhibits, Smad3-mediated renal fibrosis and nuclear factor-κB-driven renal inflammation. Transforming growth factor-β1 activates Smad3 to regulate microRNAs that mediate renal fibrosis. Of these, miR-21 and miR-192 are upregulated, whereas the miR-29 and miR-200 families are downregulated. Targeting downstream TGF-β/Smad signalling by overexpressing Smad7- or Smad3-dependent microRNA related to fibrosis may represent a novel and effective strategy for the treatment of DN. © 2011 The Author Clinical and Experimental Pharmacology and Physiology © 2011 Blackwell Publishing Asia Pty Ltd.