AIMS/HYPOTHESIS: Identification of variants predicting development of renal dysfunction would offer substantial clinical benefits. There is evidence that coding non-synonymous variants in the gene encoding paraoxonase 2 (PON2) are associated with nephropathy in both type 1 and type 2 diabetes. METHODS: We examined the relationship between variation at the C311S and A148G polymorphisms (together with PON2 intronic variant rs12704795) and indices of renal dysfunction (progression to micro- and macroalbuminuria, plasma creatinine increases) in 3,374 newly diagnosed type 2 diabetic subjects from the UK Prospective Diabetes Study followed prospectively (median 14.0 years), using proportional hazards models, adjusted for sex, ethnicity and other known or putative risk factors. RESULTS: rs12704795 genotypes were associated with differing rates of development of microalbuminuria (relative risk [RR] for CC vs AA homozygotes 0.68 [95% CI 0.54-0.87], p=0.002) but not other measures of worsening renal function. Heterozygotes for C311S were more likely to develop microalbuminuria (RR=1.31 [95% CI 1.11-1.54], p=0.001) but less likely to double creatinine levels during follow-up (RR=0.49 [95% CI 0.27-0.89], p=0.02). There was no corroboration of this latter association for related outcomes and no prior evidence supports heterosis effects at this locus. CONCLUSIONS/INTERPRETATION: We conclude that the PON2 variants typed in this study have, at best, a small effect on the risk of renal dysfunction in type 2 diabetes.