Previously, we have reported that pigment epithelium-derived factor (PEDF) ameliorates albuminuria and inhibits matrix protein deposition in the kidney of streptozotocin (STZ)-induced diabetic rats, suggesting a reno-protective effect of PEDF in early stages of diabetic nephropathy. As inflammation is a major contributor to the development and progression of diabetic nephropathy, we examined in the present study whether PEDF inhibits renal inflammation in diabetic kidney. Diabetic rats received an intravenous injection of adenovirus expressing PEDF (Ad-PEDF) or the same titer of a control virus. Three weeks after the injection, diabetic rats treated with the control virus showed significantly elevated renal levels of pro-inflammatory factors such as ICAM-1, MCP-1, TNF- and VEGF when compared with age-matched non-diabetic controls. Ad-PEDF effectively suppressed the over-expression of these pro-inflammatory factors in diabetic kidneys. In cultured primary human renal mesangial cells (HMC), the high glucose medium-induced up-regulation of VEGF and MCP-1 was largely blocked by PEDF. Furthermore, PEDF inhibited high glucose-induced activation of NF-B, a key transcription factor mediating inflammatory responses, and HIF-1, a major activator of VEGF expression in HMC. These results suggest that the reno-protective effect of PEDF against diabetic nephropathy may be partially through its anti-inflammatory activity, likely by blocking the NF-B and HIF-1 pathways.