The effector hormone Angiotensin (Ang) II has well-known haemodynamic and non-haemodynamic effects on nephropathy progression via binding to angiotensin type 1 receptors (AT1R). The more enigmatic angiotensin type 2 receptors (AT2R) are also bound by AngII, and until recently, AT2R activation was thought to oppose AT1R function. Recent studies have demonstrated beneficial effects of a novel AT2R agonist, Compound 21 (C21) on cardiac function and anti-inflammatory properties in pathological states, including diabetes. However, the role of AT2R in diabetic nephropathy still remains unclear. Thus, this study aims to evaluate the structural and functional effects of C21 on the development and progression of diabetic nephropathy. Apolipoprotein-E knockout (ApoE-/-) mice were rendered diabetic with streptozotocin (STZ) and treated in the absence or presence of C21 (1 mg/kg/day) while non-diabetic ApoE-/- mice were left untreated or treated with C21 at a similar concentration (which served as controls) over a 20-week period. STZ-induced diabetic mice showed significant increased in albuminuria, mesangial area and tubulointerstitial area (all p<0.05) when compared to non-diabetic controls. Treatment of diabetic mice with C21 significantly attenuated the elevated albuminuria (Diabetic; 118.1±10.1 vs. Diabetic+C21; 88.2±10.1ng/24hours, p=0.029) and mesangial area (Diabetic; 30±2 vs. Diabetic+C21; 22±2%, p=0.02). Glomerulosclerosis also trended to a decrease with C21 treatment (p=0.057). RT-PCR analyses had also demonstrated that C21 treatment significantly ameliorated diabetes-induced up-regulation of monocyte chemoattractant protein (MCP)-1, CD11b, transforming growth factor (TGF)-β1, connective tissue growth factor (CTGF), collagen (type I and IV) and fibronectin gene expression (all p<0.05 vs diabetic mice), while having no influence on the analysed markers in non-diabetics mice. Interestingly, C21 had no effect on diabetic-induced up-regulation of AT2R expression. These findings suggest that C21 improves renal functions by modulating the inflammation cascade at a downstream level, without any direct influence on the AT2R. In conclusion, this study highlights a potential pharmacological tool for slowing the progression of diabetic nephropathy.