Diabetic kidney disease (DKD) has become the major cause of chronic kidney disease or end-stage renal disease. There is still a need for innovative treatment strategies for preventing, arresting, treating, and reversing DKD, and a plethora of scientific evidence has revealed that Chinese herbal monomers can attenuate DKD in multiple ways. Astragaloside IV (AS-IV) is one of the active ingredients of Astragalus membranaceus and was selected as a chemical marker in the Chinese Pharmacopeia for quality control purposes. An increasing amount of studies indicate that AS-IV is a promising novel drug for the treatment of DKD. AS-IV has been shown to improve DKD by combating oxidative stress, attenuating endoplasmic reticulum stress, regulating calcium homeostasis, alleviating inflammation, improving vascular function, improving epithelial to mesenchymal transition and so on. This review briefly summarizes the pathogenesis of DKD, systematically reviews the mechanisms by which AS-IV improves DKD, and aims to facilitate related pharmacological research and development to promote the utilization of Chinese herbal monomers in DKD.