Diabetes mellitus is now the most common cause of new cases of end-stage kidney disease treated with kidney replacement therapy in Australia. In addition to the approximately 5000 Australians receiving maintenance dialysis or living with a kidney transplant as a consequence of diabetes, many die from untreated end-stage kidney disease due to diabetes (DM-ESKD) each year. For every Australian receiving renal replacement therapy due to diabetes, at least 50 others have earlier stages of diabetic kidney disease (DKD). Based on projected increases in type 2 diabetes prevalence, the size of this underlying population with DKD will potentially exceed half a million by 2025. In addition to the risk of developing DM-ESKD, this population is at increased risk of premature cardiovascular morbidity and all-cause mortality. Higher rates of hospitalization, use of specialist services and prescription drugs mean that those with DKD also incur significantly greater health care costs compared with those with diabetes or chronic kidney disease alone. However, in contrast to the increasing prevalence of diabetes and early stages of DKD, recent trends in the incidence of DM-ESKD suggest that better management in the earlier stages of DKD has been successful in slowing rates of disease progression. Simultaneous improvements in use of renin-angiotensin inhibitors and improved glycaemic and blood pressure control are likely to be largely responsible for this trend. Primary prevention, maximizing early detection of DKD and optimal management of diabetes and kidney disease hold great potential to attenuate the future health burden attributable to DKD in Australia.