Diabetic nephropathy (DN) is the leading cause of endstage renal disease (ESRD) in developed countries. Several environmental and genetic factors predict the development and progression of DN. The renin-angiotensin system was demonstrated to be involved in the development of DN. We evaluated the association between rs4340 of the angiotensin-converting enzyme (ACE) gene and DN in Caucasians with type 2 diabetes mellitus (T2DM) in 276 Slovenian patients with T2DM who had DN, and 375 patients without clinical signs of DN. Genetic analysis was performed with either standard polymerase chain reaction (PCR) (for rs4340). Results were analyzed using the χ2 test and multivariate logistic regression analyses. We found no association between rs4340 and DN. Cystatin C was significantly higher in the DN+ group (p <0.001) than in the DN group. Cystatin C was a better marker for the estimation of renal function than estimated glomerular filtration rate (eGFR) according to the modification diet in renal disease (MDRD) equation mL/ min. We concluded that there was no association between the rs4340 of the ACE gene and DN in Caucasian patients who have T2DM.