Background: Diabetic nephropathy-caused end-stage renal disease has become the main reason of chronic renal failure. Traditional hemodialysis and kidney transplantation cannot meet clinical needs. Regenerative medicine research based on stem cells brings new hope for treatment of diabetic nephropathy. Objective: To comprehensively analyze the mechanism underlying different sources of stem cells for treatment of diabetic nephropathy and the clinical implications. Methods: Papers addressing stem cells for the treatment of diabetic nephropathy were retrieved by computer in CNKI database and PubMed database from January 2006 to August 2011 with the key words "embryonic stem cells, bone marrow mesenchymal stem cells, induced pluripotent stem cells, diabetic nephropathy" in Chinese and English. Papers published recently or in journals with high impact factor were selected. A total of 26 papers were included for review. Results and Conclusion: Embryonic stem cells, bone marrow mesenchymal stem cells, induced pluripotent stem cells have the potential to differentiate into renal histiocyte. A large numbers of experimental studies have shown that stem cells transplantation has a positive effect on recovery of injured kidney. Stem cells transplantation can provide a novel therapy for diabetic nephropathy.