Background: Environmental lead exposure has been linked with reduced kidney function. However, evidence about its role in diabetic kidney damage, especially when considering the nutritional status of vitamin D, is sparse. Methods: This observational study comprised 4,033 diabetic patients from seven communities in Shanghai, China. The associations of blood lead with urinary albumin-to-creatinine ratio (UACR) and albuminuria, defined as UACR ≥30 mg/g, according to serum 25-hydroxyvitamin D [25(OH)D] levels were analyzed using linear and Poisson regression models, respectively. Results: A doubling of blood lead level was associated with a 10.7% higher UACR (95% CI, 6.19% to 15.5%) in diabetic patients with 25(OH)D <50 nmol/L, whereas the estimate declined to 2.03% (95% CI, −5.18% to 9.78%) in those with 25(OH)D ≥50 nmol/L. The difference in the association for albuminuria prevalence was also observed between the two groups, with risk ratios of 1.09 (95% CI, 1.03–1.15) and 0.99 (95% CI, 0.86–1.14) per doubling of blood lead level, respectively. Furthermore, the increment of UACR in relation to blood lead appeared to be two times higher in patients with 25(OH)D <50 nmol/L and estimated glomerular filtration rate (eGFR) <60 mL/min/1.73 m2 than those with eGFR ≥60 mL/min/1.73 m2. While in patients with 25(OH)D ≥50 nmol/L, there was no association between blood lead and UACR regardless of eGFR category. Conclusions: Higher blood lead levels were associated with increased urinary albumin excretion in diabetic patients with vitamin D deficiency, which became more pronounced in the presence of reduced eGFR. Further prospective studies are needed to validate our findings and to determine whether vitamin D supplementation yields a benefit.