Microalbuminuria is the earliest detectable clinical abnormality in diabetic glomerulopathy. On a molecular level, metabolic pathways activated by hyperglycemia, glycated proteins, hemodynamic factors, and oxidative stress are key players in the genesis of diabetic kidney disease. A variety of growth factors and cytokines are then induced through complex signal transduction pathways. Transforming growth factor-beta 1 (TGF-β1) has emerged as an important downstream mediator for the development of renal hypertrophy and the accumulation of mesangial extracellular matrix components, but there is limited evidence to support its role in the development of albuminuria. The loss of proteoglycans in the glomerular basement membrane (GBM) has been recently questioned as causative of the albuminuria, and current research has focused on the podocyte as a central target for the effects of the metabolic milieu in the development and progression of diabetic albuminuria. Podocyte-derived vascular endothelial growth factor (VEGF), a permeability and angiogenic factor whose expression is increased in diabetic kidney disease, is perhaps a major mediator of the increased protein filtration. Decreased podocyte number and/or density as a result of apoptosis or detachment, GBM thickening with altered matrix composition, and a reduction in nephrin protein in the slit diaphragm with podocyte foot process effacement, all comprise the principal features of diabetic podocytopathy that clinically manifests as albuminuria and proteinuria. Many of these events are mediated by angiotensin II whose local concentration is stimulated by high glucose, mechanical stretch, and proteinuria itself. Angiotensin II in turn stimulates podocyte-derived VEGF, suppresses nephrin expression, and induces TGF-β1 leading to podocyte apoptosis and fostering the development of glomerulosclerosis. Proteinuria can then induce in tubular cells a genetic program leading to tubulointerstitial inflammation, fibrosis and tubular atrophy. Besides direct effects of albuminuria on tubular cells, pathophysiological changes in the ultrafiltration barrier lead to an increased tubular filtration of various growth factors (TGF-β1, insulin-like growth factor I) that may further alter the function of tubular cells. Moreover, angiotensin II also stimulates uptake of ultrafiltered proteins into tubular cells and enhances the production of proinflammatory and profibrotic cytokines within the cells. Migration of macrophages and other inflammatory cells into the tubulointerstitium occurs. Increased synthesis and decreased turnover of extracellular matrix proteins in tubular cells and interstitial fibroblasts contribute to interstitial fibrosis. In addition, under locally high concentrations of angiotensin II and TGF-β1, tubular cells may change their phenotype and become fibroblasts by a process called epithelial to mesenchymal transition (EMT) which contributes to interstitial fibrosis and tubular atrophy because of vanishing epithelia cells. An alternative explanation for the development of albuminuria in diabetic nephropathy that involves primarily an abnormality in tubular handling of ultrafiltered proteins has also been suggested, but these changes are not necessarily exclusive of the altered properties of glomerular ultrafiltration barrier.