Peroxisome proliferator-activated receptors (PPARs) are nuclear transcription factors and play a central role in insulin sensitivity, lipid metabolism, and inflammation. Both PPARalpha and -gamma are expressed in the kidney, and their agonists exhibit renoprotective effects in type 2 diabetes. In the present studies, we investigated the effect of the PPARalpha/gamma dual agonist tesaglitazar on diabetic nephropathy in type 2 diabetic db/db mice. Treatment of db/db mice with tesaglitazar for 3 months significantly lowered fasting plasma glucose and homeostasis model assessment of insulin resistance levels but had little effect on body weight, adiposity, or cardiac function. Treatment with tesaglitazar was associated with reduced plasma insulin and total triglyceride levels and increased plasma adiponectin levels. Notably, tesaglitazar markedly attenuated albuminuria and significantly lowered glomerulofibrosis, collagen deposition, and transforming growth factor-beta1 expression in renal tissues of db/db mice. In cultured mesangial cells and proximal tubule cells, where both PPARalpha and -gamma were expressed, tesaglitazar treatment abolished high glucose-induced total collagen protein production and type I and IV collagen gene expression. Collectively, tesaglitazar treatment not only improved insulin resistance, glycemic control, and lipid profile but also markedly attenuated albuminuria and renal glomerular fibrosis in db/db mice. These findings support the utility of dual PPARalpha/gamma agonists in treating type 2 diabetes and diabetic nephropathy.