Diabetic nephropathy (DN) is a major cause of end-stage renal disease and affects a large number of individuals with diabetes. However, the development of specific treatments for DN has not yet been identified. Hence, this review is concisely designed to understand the molecular pathways leading to DN in order to develop suitable therapeutic strategies. Extensive literature search have been carried in regard with the pathogenesis and pathophysiology of DN, drug targets and updates on clinical trials, the consequences associated with DN and the potential biomarkers for diagnosis and prediction of DN are discussed in this review. DN is characterised by microalbuminuria and macroalbuminuria, and morphological changes such as glomerular thickening, interstitial fibrosis, formation of nodular glomerulosclerosis and decreased endothelial cell fenestration. Besides, the involvement of renin-angiotensin-aldosterone system, inflammation and genetic factors are the key pathways in the progression of DN. In regard with drug development drugs targeted to epidermal growth factor, inflammatory cytokines, ACTH receptor and TGFβ1 receptors are in pipeline for clinical trials whereas, several drugs have also failed in phase III and phase IV of clinical trials due to lack of efficacy and severe adverse effect. The research on DN is limited with respect to its pathogenesis and drug development. Thus, a more detailed understanding of the pathogenesis of DN is very essential to progress in the drug development process.