Angiotensin receptor blockers are renoprotective in hypertensive azotemic patients with type 2 diabetes, but their efficacy in early diabetic kidney disease is uncertain. We performed a 6-year randomized clinical trial in 169 American Indians with type 2 diabetes and normoalbuminuria (albumin/creatinine ratio [ACR] <30 mg/g; n = 91) or microalbuminuria (ACR 30–299 mg/g; n = 78) at baseline. The primary outcome was decline in glomerular filtration rate (GFR) to ≤60 mL/min or to half the baseline value in subjects who entered with GFR <120 mL/min. Another outcome was differences in glomerular structure at end of treatment. Subjects received 100 mg losartan or placebo daily. GFR was measured annually; 111 subjects underwent kidney biopsies. Only nine subjects reached the GFR outcome, and the unadjusted hazard ratio (losartan vs. placebo) was 0.50 (95% CI, 0.12–1.99). Differences in mesangial fractional volume were not estimated in the combined albuminuria groups because of an interaction with treatment assignment. In separate analyses, mesangial fractional volume was lower in subjects treated with losartan in the microalbuminuria group (18.8 vs. 25.6%; P = 0.02), but not in the normoalbuminuria group (19.6 vs. 17.8%; P = 0.86). Treatment with losartan may preserve some features of kidney structure in American Indians with type 2 diabetes and microalbuminuria.