Diabetic kidney disease (DKD) has become the leading cause of end-stage renal disease (ESRD), and the prevalence of DKD has increased worldwide during recent years. DKD is associated with poor therapeutic outcomes in most patients, but there is limited understanding of its pathogenesis. This review suggests that oxidative stress interacts with many other factors in causing DKD. Highly active mitochondria and NAD(P)H oxidase are major sources of oxidants, and they significantly affect the risk for DKD. Oxidative stress and inflammation may be considered reciprocal causes of DKD, in that each is a cause and an effect of DKD. Reactive oxygen species (ROS) can act as second messengers in various signaling pathways and as regulators of metabolism, activation, proliferation, differentiation, and apoptosis of immune cells. Epigenetic modifications, such as DNA methylation, histone modifications, and non-coding RNAs can modulate oxidative stress. The development of new technologies and identification of new epigenetic mechanisms may provide novel opportunities for the diagnosis and treatment of DKD. Clinical trials demonstrated that novel therapies which reduce oxidative stress can slow the progression of DKD. These therapies include the NRF2 activator bardoxolone methyl, new blood glucose-lowering drugs such as sodium-glucose cotransporter 2 inhibitors, and glucagon-like peptide-1 receptor agonists. Future studies should focus on improving early diagnosis and the development of more effective combination treatments for this multifactorial disease.