Longstanding diabetes causes renal injury with early dropout of podocytes, albuminuria, glomerular and tubulointerstitial fibrosis, and progressive renal failure. The renal pathology seems to be driven, in part, by TGF-beta and is associated with a loss of renal bone morphogenic protein-7 (BMP-7) expression. Here, the hypothesis that maintenance of renal (especially podocyte) BMP-7 by transgenic expression reduces diabetic renal injury was tested. Diabetic mice that expressed the phosphoenolpyruvate carboxykinase promoter-driven BMP-7 transgene and nondiabetic, transgenic mice as well as diabetic and nondiabetic wild-type controls were studied for up to 1 yr. Transgenic expression of BMP-7 in glomerular podocytes and proximal tubules prevents podocyte dropout and reductions in nephrin levels in diabetic mice. Maintenance of BMP-7 also reduces glomerular fibrosis and interstitial collagen accumulation as well as collagen I and fibronectin expression. Diabetic wild-type mice develop progressive albuminuria, which is substantially reduced in transgenic mice. These effects of the BMP-7 transgene occur without changing renal TGF-beta levels. It is concluded that maintenance of renal BMP-7 during the evolution of diabetic nephropathy reduces diabetic renal injury, especially podocyte dropout. The findings also establish a role for endogenous glomerular BMP-7 as an autocrine regulator of podocyte integrity in vivo.