Diabetes mellitus is a multifactorial disorder of hyperglycemia caused by a combination of biochemical, molecular and genetic factors, which leads to the dysfunction of various organs including kidneys. Diabetic nephropathy (DN) is one of the microvascular complications of diabetes that results due to poor glycemic control. Several molecular and biochemical pathways have been implicated in the pathogenesis of DN. Of these, the Renin Angiotensin Aldosterone System (RAAS) is considered as a key pathway. RAAS involves various subsystems which contribute to the development of DN. Mutations in several genes of the RAAS pathway have been associated with the development of DN. These genes or their products present them as therapeutic targets for potent drugs to control or prevent DN, and development of new drugs for targeting the RAAS. Drugs in use for DN are mainly the Angiotensin Converting Enzyme (ACE) inhibitors, Angiotensin Receptors Blockers (ARB) and renin inhibitors which play important roles in reducing DN. Hence, the present review is focused on the pathophysiology and genetic factors for DN by exploring the RAAS pathway and emphasizing the benefits of blocking this pathway to control and prevent DN.