Insertion/deletion polymorphism of the angiotensin I converting enzyme (ACE) genetically determines most of the plasma ACE activity. Modulation of ACE gene activity might have an important bearing on the rate of progression of renal disease, though its exact role in the nephropathy of type 2 diabetes (T2DM) is far from clear. This prospective, cross-sectional, observational study was designed to study the correlation between insertion/deletion polymorphism of ACE gene in diabetic nephropathy. T2DM cases (n=30) were evaluated, regarding duration, onset and degree of albuminuria, renal insufficiency and hypertension. All patients underwent detailed clinical and biochemical evaluation. Genomic DNA intron 16 of the ACE gene was amplified by polymerase chain reaction (PCR) followed by sequencing. The mean age of this study group was 45.21±2.34 yrs. PCR amplification of ACE gene fragments revealed insertion/insertion (I/I, n =8); insertion/deletion (I/D, n = 18) and deletion/deletion (D/D, n = 4) alleles. All three groups were matched age-wise. Micro- and macro-vascular complications were more prevalent in DD type (p=0.012). The majority (75%) of patients with II allele took a longer time to develop overt albumiuria, having lesser hypertension, renal dysfunction, and dyslipidemia than ID and DD allele (p<0.005). On the other hand, urinary albumin excretion, systemic and diastolic blood pressures, triglycerides, serum creatinine and low density lipoprotein-C were significantly higher (p<0.005), in patients of DD type than II and ID groups. This finding suggests that patients with DD allele of the ACE gene are more likely to have progressive diabetic nephropathy with micro- and macro-vascular complications.