Although diabetic nephropathy (DN) is a major cause of end-stage renal disease, the mechanism of dysfunction has not yet been clarified. We previously reported that in diabetes proinsulin-producing bone marrow-derived cells (BMDCs) fuse with hepatocytes and neurons. Fusion cells are polyploidy and produce tumor necrosis factor (TNF)-α, ultimately causing diabetic complications. In this study, we assessed whether the same mechanism is involved in DN. We performed bone marrow transplantation from male GFP-Tg mice to female C57BL/6J mice and produced diabetes by streptozotocin (STZ) or a high-fat diet. In diabetic kidneys, massive infiltration of BMDCs and tubulointerstitial injury were prominent. BMDCs and damaged tubular epithelial cells were positively stained with proinsulin and TNF-α. Cell fusion between BMDCs and renal tubules was confirmed by the presence of Y chromosome. Of tubular epithelial cells, 15.4% contain Y chromosomes in STZ-diabetic mice, 8.6% in HFD-diabetic mice, but only 1.5% in nondiabetic mice. Fusion cells primarily expressed TNF-α and caspase-3 in diabetic kidney. These in vivo findings were confirmed by in vitro coculture experiments between isolated renal tubular cells and BMDCs. It was concluded that cell fusion between BMDCs and renal tubular epithelial cells plays a crucial role in DN.