An increasing number of clinical and animal model studies indicate that activation of the innate immune system and inflammatory mechanisms are important in the pathogenesis of diabetic nephropathy. Nucleotide-binding oligomerization domain containing 2 (NOD2), a member of the NOD-like receptor family, plays an important role in innate immune response. Here we explore the contribution of NOD2 to the pathogenesis of diabetic nephropathy and found that it was upregulated in kidney biopsies from diabetic patients and high-fat diet/streptozotocin-induced diabetic mice. Further, NOD2 deficiency ameliorated renal injury in diabetic mice. In vitro, NOD2 induced proinflammatory response and impaired insulin signaling and insulin-induced glucose uptake in podocytes. Moreover, podocytes treated with high glucose, advanced glycation end-products, tumor necrosis factor-α, or transforming growth factor-β (common detrimental factors in diabetic nephropathy) significantly increased NOD2 expression. NOD2 knockout diabetic mice were protected from the hyperglycemia-induced reduction in nephrin expression. Further, knockdown of NOD2 expression attenuated high glucose-induced nephrin downregulation in vitro, supporting an essential role of NOD2 in mediating hyperglycemia-induced podocyte dysfunction. Thus, NOD2 is one of the critical components of a signal transduction pathway that links renal injury to inflammation and podocyte insulin resistance in diabetic nephropathy.