Chronic inflammation promotes the progression of diabetic nephropathy (DN). However, the role of TNFα remains unclear. The objectives of the present study are to examine whether TNFα inhibition with a soluble TNF receptor 2 (TNFR2) fusion protein, i.e. Etanercept (ETN), improves early stage of DN in type 2 diabetic model of the KK-A^y mouse, and to also investigate which TNF pathway, TNFR1 or TNFR2, predominantly involves in the progression of this disease. Methods: ETN was injected intraperitoneally to mice for 8 weeks. Renal damage was evaluated by immunohistochemistry, western blotting, and/or real-time PCR. In vitro, mouse tubular proximal cells were stimulated by TNFα and/or high glucose (HG), and treated by ETN. ETN dramatically improved not only albuminuria but also glycemic control. Renal mRNA and/or protein levels of TNFR2, but not TNFα and TNFR1, in the ETN-treated KK-A^y mice were significantly decreased compared with the no-treated KK-A^y mice. The mRNA levels of ICAM-1, VCAM-1, and MCP-1 and the number of F4/80 positive cells were all decreased after treatment. The numbers of cleaved caspase 3 and TUNEL positive cells in the no-treated mice were very few, and were not different from the ETN-treated mice. In vitro, stimulation by TNFα or HG markedly increased both TNFRs mRNA levels, unlike in the case of in vivo. Furthermore, ETN partly recovered TNFα, but not HG, induced TNFRs mRNA levels. It appears that ETN may improve the progression of early stage of DN predominantly through the inhibition of the anti-inflammatory action of the TNFα-TNFR2 pathway.