Diabetes is a chronic condition which poses a risk for three major complications. They are diabetic retinopathy, nephropathy and neuropathy. Almost one third of diabetic patients (IDDM or NIDDM) develop diabetic nephropathy in their life time. Because of increased vascular permeability in chronic conditions increased urinary albumin excretion in the range of 30-200 mg/L (microalbuminuria) gives an early signal of incipient diabetic nephropathy. The prevalence of microalbuminuria was found to be 41% in diabetic patients with duration of more than 5 years. Seventy percent of diabetic patients with microalbuminuria were hypertensive. ACE inhibitors are shown to have significant effects on microalbuminuria and hypertension. We conclude that microalbuminuria is an early feature of excessive capillary leakage and its assessment in diabetic patients with duration of more than 5 years provides a simple non-invasive method of early diagnosis of incipient diabetic nephropathy. An early intervention may retard the progression to end-stage renal disease (ESRD).