Diabetic nephropathy (DN) is one of the most serious microvascular complications of diabetes. The study aims to evaluate the diagnostic value of serum neutrophil gelatinase-associated lipocalin (NGAL) and retinol-binding protein 4 (RBP4) as biomarkers for early detection of nephropathy in type 2 diabetic patients. The current study was performed on 150 type 2 diabetic patients. These patients were classified into three equal groups according to their albumin/creatinine ratio (ACR), including patients with normoalbuminuria (ACR <30 mg/g creatinine), patients with microalbuminuria (ACR = 30–300 mg/g creatinine), and patients with macroalbuminuria (ACR >300 mg/g creatinine). Fifty apparently healthy subjects matching the same age and socioeconomic status with diabetic subjects were selected as a control group. The plasma glucose, insulin, glycosylated hemoglobin (HbA1c), homeostasis model assessment of insulin resistance (HOMA-IR), lipid profile, urea, creatinine, cystatin C, glomerular filtration rate (GFR), NGAL, and RBP4 were measured in the studied groups. Significantly elevated NGAL and RBP4 levels were observed in micro- and macroalbuminuric diabetic groups when compared to the control and normoalbuminuric diabetic groups. NGAL and RBP4 were found to correlate positively with duration of diabetes, systolic and diastolic blood pressure, glucose, HbA1c, HOMA-IR, triacylglycerol, and ACR, but correlate inversely with GFR in DN groups. Receiver operating characteristic curves revealed that for early detection of DN, the best cutoff values to discriminate DN and diabetic without nephropathy groups were 91.5 ng/mL for NGAL with 87% sensitivity, 74% specificity, and area under the curve (AUC) = 0.881; 24.5 ng/mL for RBP4 with 84% sensitivity, 90% specificity, and AUC = 0.912; and 37.5 mg/g creatinine for ACR with 89% sensitivity, 72% specificity, and AUC = 0.819. RBP4 is more specific (90% specificity) than NGAL (74% specificity) and ACR (72% specificity). Therefore, RBP4 marker may serve as a tool to follow-up clinical monitoring of the development and progression of DN.