AimsWe explored the predictive utility of baseline neutrophil/lymphocyte ratio (NLR), which reflects a systemic inflammatory tone, in kidney impairment in type 2 diabetes mellitus (T2DM); and investigated the effect of extracellular water/total body water (ECW/TBW) ratio on the relationship. MethodsThis longitudinal study included 1,224 T2DM adults recruited from a single centre. Cox regression analyses examined the association between NLR and progressive kidney function decline or albuminuria progression. Improvements in risk discrimination were assessed using Harrell’s concordance-statistics. The mediatory role of ECW/TBW ratio estimated by bioelectrical impedance was evaluated. ResultsHigher baseline NLR levels were observed in cases with kidney function decline or albuminuria progression over a median 2-year follow-up. NLR independently predicted progressive kidney function decline (hazard ratio:1.39, 95% CI:1.21–1.60, P < 0.001) or albuminuria progression (hazard ratio:1.34, 95% CI:1.08–1.68, P = 0.009). Addition of NLR to a base model comprising demographics, T2DM duration, metabolic and renal parameters, and medications significantly improved the risk discrimination of kidney function decline (P = 0.022) but not albuminuria progression. ECW/TBW ratio accounted for 19.7% of the total effect between NLR and kidney function loss. ConclusionsIncreased NLR reflecting systemic inflammation is associated with progressive kidney function decline in T2DM, partially explained by dysregulated body fluid balance.