Owing to the increasing prevalence of diabetic mellitus, diabetic kidney disease (DKD) is presently the leading cause of chronic kidney disease and end‐stage renal disease worldwide. Early identification and disease interception is of paramount clinical importance for DKD management. However, current diagnostic, disease monitoring and prognostic tools are not satisfactory, due to their low sensitivity, low specificity, or invasiveness. Magnetic resonance imaging (MRI) is noninvasive and offers a host of contrast mechanisms that are sensitive to pathophysiological changes and risk factors associated with DKD. MRI tissue characterization involves structural and functional information including renal morphology (kidney volume (TKV) and parenchyma thickness using T1‐ or T2‐weighted MRI), renal microstructure (diffusion weighted imaging, DWI), renal tissue oxygenation (blood oxygenation level dependent MRI, BOLD), renal hemodynamics (arterial spin labeling and phase contrast MRI), fibrosis (DWI) and abdominal or perirenal fat fraction (Dixon MRI). Recent (pre)clinical studies demonstrated the feasibility and potential value of DKD evaluation with MRI. Recognizing this opportunity, this review outlines key concepts and current trends in renal MRI technology for furthering our understanding of the mechanisms underlying DKD and for supplementing clinical decision‐making in DKD. Progress in preclinical MRI of DKD is surveyed, and challenges for clinical translation of renal MRI are discussed. Future directions of DKD assessment and renal tissue characterization with (multi)parametric MRI are explored. Opportunities for discovery and clinical break‐through are discussed including biological validation of the MRI findings, large‐scale population studies, standardization of DKD protocols, the synergistic connection with data science to advance comprehensive texture analysis, and the development of smart and automatic data analysis and data visualization tools to further the concepts of virtual biopsy and personalized DKD precision medicine. We hope that this review will convey this vision and inspire the reader to become pioneers in noninvasive assessment and management of DKD with MRI.Level of Evidence1Technical EfficacyStage 2