The crucial pathology underlying progressive chronic kidney disease in diabetes is tubulointerstitial fibrosis. Central to this process is epithelial-mesenchymal transformation (EMT) of proximal tubular epithelial cells driven by maladaptive transforming growth factor-1 (TGF-1) signaling. Novel signaling roles for C-peptide have recently been discovered with evidence emerging that C-peptide may mitigate microvascular complications of diabetes. We studied the potential for C-peptide to interrupt injurious TGF-1 signaling pathways and thus block development of EMT in HK2 human kidney proximal tubular cells. Cells were incubated with TGF-1 either alone or with C-peptide in low or high glucose. Changes in cell morphology, TGF-1 receptor expression, vimentin, E-cadherin and phosphorlyated Smads were assessed. Luciferase reporters were used to assess Smad activity. The cytoskeleton was visualised by TRITC phalloidin staining The typical TGF-1-stimulated, EMT associated morphological alterations of proximal tubular cells, including increased vimentin expression, decreased E-cadherin expression and cytoskeletal re-arrangements, were prevented by C-peptide treatment. C-peptide also blocked TGF-1 induced up-regulation of expression of both type I and type II TGF-1 receptors, and attenuated TGF-1 mediated Smad phosphorylation and Smad transcriptional activity. These effects of C-peptide were inhibited by pertussis toxin. The results demonstrate that C-peptide almost completely reversed the morphological changes in PT cells induced by TGF-1 and suggest a role or C-peptide as a renoprotective agent in diabetic nephropathy.