Objective: Diabetic nephropathy is a frequent complication of diabetes mellitus and is a common cause of the end-stage renal disease. Diabetic nephropathy should be detected and treated at the early microalbuminuria stage, which is potentially reversible. Microalbuminuria used as a gold standard to determine the degree of advancement of diabetic nephropathy has certain limitations; hence, additional markers are being sought for the early identification of diabetic complications. Ischemia-modified albumin, an oxidative stress marker, has been shown to be associated with diabetic complications. The aim of the study: The present study is undertaken to evaluate ischemia-modified albumin as a useful marker in estimating kidney dysfunction in patients with diabetic nephropathy along with urine microalbumin and creatinine. Material and Methods: This was a case-control study that enrolled 40 patients with diabetic nephropathy and 40 ageand gender-matched controls. All biochemical parameters were analyzed on a Beckman Coulter Unicel DXC 600 clinical chemistry auto analyzer, Galway, Ireland. Ischemia-modified albumin was estimated by the albumin cobalt binding test using a Perkin Elmer Lambda 25 spectrophotometer. Results: Compared with controls, urine microalbumin and ischemia-modified albumin levels were significantly increased in patients with diabetic nephropathy (p<0.001). Ischemia-modified albumin levels showed a significant positive correlation between creatinine and microalbumin in patients with diabetic nephropathy. Ischemia-modified albumin showed the high sensitivity of 92.5% and specificity of 97.5% than microalbumin did. Conclusion: The results suggest that simultaneous measurement of ischemia-modified albumin with other parameters such as creatinine and microalbumin might be useful in identifying early kidney dysfunction in patients with diabetes mellitus.