Since chronic kidney disease due to diabetic nephropathy (DN) is becoming an ever larger health burden worldwide, more effective therapies are desperately needed. In the present study, the anti-diabetic and renoprotective effects of aliskiren have been evaluated in streptozotocin (STZ)-induced DN in rats. DN was induced by a single intraperitoneal injection of STZ (65 mg/kg). Three weeks after STZ, rats were divided into four groups; normal, diabetic, diabetic treated with gliclazide (10 mg/kg/day) for 1 month, and diabetic treated with aliskiren (50 mg/kg/day) for 1 month. At the end of the experiment, mean arterial blood pressure and heart rate were recorded. Rats were then euthanized and serum was separated for determination of glucose, insulin, kidney function tests, superoxide dismutase activity (SOD), adiponectin, and tumor necrosis factor-alpha (TNF-α). One kidney was used for estimation of malondialdehyde (MDA), reduced glutathione (GSH), and nitric oxide (NO) contents. Other kidney was used for histopathological study and immunohistochemical measurement of caspase-3 and transforming growth factor beta (TGF-β). In addition, islets of Langerhans were isolated from normal rats by collagenase digestion technique for in vitro study. Aliskiren normalized STZ-induced hyperglycemia, increased insulin level both in vivo and in vitro, normalized kidney function tests and blood pressure, and alleviated STZ-induced kidney histopathological changes. This could be related to the ability of aliskiren toward preserving hemodynamic changes and alleviating oxidative stress and inflammatory and apoptotic markers induced by STZ in rats. However, aliskiren was more effective than gliclazide in relieving STZ-induced DN. These findings support the beneficial effect of aliskiren treatment in DN which could be attributed to its anti-diabetic, renoprotective, antioxidant, anti-inflammatory, and anti-apoptotic effects. Moreover, clinical studies are required to establish the effectiveness of aliskiren treatment in patients suffering from hypertension and diabetes.