Nephropathy in patients with type I and II diabetes mellitus is a rapidly increasing problem worldwide. Studies using both glomerular and tubular cells have delineated some of the consequences induced by acute hyperglycemia. In vitro studies have clearly demonstrated that exposure of cultured renal cells, such as glomerular mesangial cells and proximal tubular epithelial cells, to elevated glucose concentrations, may alter cell proliferation and/or extracellular matrix turnover. The latter is effected both directly and indirectly by the alteration of cytokine generation. Furthermore, these in vitro studies have allowed detailed examination of the mechanisms by which exposure of these cells to high ambient glucose concentrations may alter cell function. Extension of these studies to the experimental in vivo situation has confirmed most of the in vitro findings. Important insights gained from models of type I diabetes (i.e. streptocotocin–induced diabetes) as well as type II diabetes (i.e. Goto–Kakizaki (GK) rats and obese Zucker rats) include: (1) The demonstration that increased glomerular cell proliferation and renal matrix accumulation, driven by TGF–β and/or PDGF, occur in streptocotocin–induced diabetes, yet that nephropathy in these rats does not progress to renal failure. (2) The demonstration that prolonged mild type II diabetes does induce morphological changes characteristic of pre–clinical diabetic nephropathy in GK–rats but does not result in albuminuria or progressive renal disease. (3) The demonstration that the association of type II diabetes with hyperlipidemia in obese Zucker rats results in early podocyte damage and subsequent progression to glomerulosclerosis, tubulointerstitial damage, and renal insufficiency. Identification of the mediators involved in the above processes and in particular of the conditions that will determine progression of subclinical morphological changes to overt nephropathy and renal failure will likely result in future novel therapeutic approaches to diabetic nephropathy.