Aims/hypothesis Activation of the receptor for AGE (RAGE) has been shown to be associated with diabetic nephropathy. The soluble isoform of RAGE (sRAGE) is considered to function as a decoy receptor for RAGE ligands and thereby protects against diabetic complications. A possible association between sRAGE and diabetic nephropathy is still, however, controversial and a more comprehensive analysis of sRAGE with respect to diabetic nephropathy in type 1 diabetes is therefore warranted. Methods sRAGE was measured in baseline serum samples from 3647 participants with type 1 diabetes from the nationwide multicentre Finnish Diabetic Nephropathy (FinnDiane) Study. Associations between sRAGE and diabetic nephropathy, as well as sRAGE and diabetic nephropathy progression, were evaluated by regression, competing risks and receiver operating characteristic curve analyses. The non-synonymous SNP rs2070600 (G82S) was used to test causality in the Mendelian randomisation analysis. Results Baseline sRAGE concentrations were highest in participants with diabetic nephropathy, compared with participants with a normal AER or those with microalbuminuria. Baseline sRAGE was associated with progression from macroalbuminuria to end-stage renal disease (ESRD) in the competing risks analyses, but this association disappeared when eGFR was entered into the model. The SNP rs2070600 was strongly associated with sRAGE concentrations and with progression from macroalbuminuria to ESRD. However, Mendelian randomisation analysis did not support a causal role for sRAGE in progression to ESRD. Conclusions/interpretation sRAGE is associated with progression from macroalbuminuria to ESRD, but does not add predictive value on top of conventional risk factors. Although sRAGE is a biomarker of diabetic nephropathy, in light of the Mendelian randomisation analysis it does not seem to be causally related to progression from macroalbuminuria to ESRD. Electronic supplementary material The online version of this article (10.1007/s00125-019-4883-4) contains peer-reviewed but unedited supplementary material, which is available to authorised users.