Diabetic nephropathy is a major cause of chronic renal failure in developing countries, and the prevalence rate has markedly increased during the past decade. Diabetic nephropathy shows various specific histological changes not only in the glomeruli but also in the tubulointerstitial region. In the early stage, the effacement of podocyte foot processes and thickened glomerular basement membrane (GBM) is noticed even at the stage of microalbuminuria. Nodular, diffuse, and exudative lesions, so-called diabetic glomerulosclerosis, are well known as glomerular lesions. Interstitial lesions also exhibit fibrosis, edema, and thickened tubular basement membrane. Diabetic nephropathy is considered to be multifactorial in origin with increasing evidence that one of the major pathways involved in the development and progression of diabetic nephropathy as a result of hyperglycemia. Hyperglycemia induces renal damage directly or through hemodynamic alterations, such as, glomerular hyperfiltration, shear stress, and microalbuminuria. Chronic hyperglycemia also induces nonhemodynamic dysregulations, such as, increased production of advanced glycosylation endproducts, oxidative stress, activation of signal pathway, and subsequent various cytokines. Those pathogenic mechanisms resulted in extracellular matrix deposition including mesangial expansion and GBM thickening, glomerular hypertrophy, inflammation, and proteinuria. In this review, recent opinions on the histopathologic changes and pathophysiologic mechanisms leading to initiation and progression of diabetic nephropathy will be introduced.