Iron overload (IOL) increases the risk of diabetes mellitus (DM). Capsaicin (CAP), an agonist of transient receptor potential vanilloid-1 (TRPV1), reduces the effects of IOL. We evaluated the effects of chronic CAP administration on hepcidin expression, kidney iron deposits, and urinary biomarkers in a male Wistar rat model with IOL and DM (DM-IOL). IOL was induced with oral administration of iron for 12 weeks and DM was induced with streptozotocin. Four groups were studied: Healthy, DM, DM-IOL, and DM-IOL + CAP (1 mg·kg−1·day−1 for 12 weeks). Iron deposits were visualized with Perls tissue staining and a colorimetric assay. Serum hepcidin levels were measured with an enzyme-linked immunosorbent assay. Kidney biomarkers were assayed in 24 h urine samples. In the DM-IOL + CAP group, the total area of iron deposits and the total iron content in kidneys were smaller than those observed in both untreated DM groups. CAP administration significantly increased hepcidin levels in the DM-IOL group. Urinary levels of albumin, cystatin C, and beta-2-microglobulin were similar in all three experimental groups. In conclusion, we showed that in a DM-IOL animal model, CAP reduced renal iron deposits and increased the level of circulating hepcidin.