This study was carried out to look for diagnostic and prognostic role of neutrophil gelatinase-associated lipocalin (NGAL) in early diabetic nephropathy (DN) in type 2 diabetes individuals. NGAL was measured in both urinary and serum sample of 144 type 2 diabetes individuals stratified into three categories based on urinary albumin-creatinine ratio and 54 control populations with estimated glomerular filtration rate >60 mL/min/1.73 m2 and serum creatinine <1.2 mg/dl. The serum NGAL (sNGAL), urine NGAL (uNGAL), and uNGAL/urine creatinine were significantly higher in diabetic individuals than in the control populations with significant difference in between the groups (P < 0.05). Difference of above values between control value and normoalbuminuria was also statistically significant (P < 0.05). Again, sNGAL and uNGAL correlate positively with albuminuria (P < 0.05). Tubular injury may precede glomerular injury in diabetic individuals, and NGAL can be used as a biomarker to diagnose DN even earlier to incipient nephropathy. Both sNGAL and uNGAL can predict albuminuria and be used as a noninvasive tool for diagnosis, staging, and progression of DN.