Excessive accumulation of extracellular matrix (ECM) in the kidneys and epithelial to mesenchymal transition (EMT) of renal tubular epithelial cells contribute to the renal fibrosis that is associated with diabetic nephropathy. Histone deacetylase (HDAC) determines the acetylation status of histones and, thereby, controls the regulation of gene expression. This study examined the effect of HDAC inhibition on renal fibrosis induced by diabetes or transforming growth factor (TGF)-1 and determined the role of reactive oxygen species (ROS) as mediators of HDAC activation. In streptozotocin (STZ)-induced diabetic kidneys and TGF-1 treated normal rat kidney tubular epithelial cells (NRK52-E), we found that trichostatin A, a non-selective HDAC inhibitor, decreased mRNA and protein expressions of ECM components and prevented EMT. Valproic acid and class I-selective HDAC inhibitor, SK-7041, also showed the similar effects in NRK52-E cells. Among the six HDACs tested (HDAC 1 through 5 and HDAC 8), HDAC 2 activity significantly increased in the kidneys of STZ-induced diabetic rats and db/db mice and TGF-1 treated NRK52-E cells. Levels of mRNA expression of fibronectin and -smooth muscle actin were decreased while E-cadherin mRNA was increased when HDAC 2 was knocked down using RNA interference in NRK52-E cells. Interestingly, hydrogen peroxide increased HDAC 2 activity and the treatment with an antioxidant, N-acetylcystein, almost completely reduced TGF-1-induced activation of HDAC 2. These findings suggest that HDAC 2 plays an important role in the development of ECM accumulation and EMT in diabetic kidney and that ROS mediate TGF-1-induced activation of HDAC 2.