Accumulating evidence suggests that the intrarenal renin-angiotensin system may be involved in the progression of diabetic nephropathy. Chymase is a potent local angiotensin II-forming enzyme in several species, including humans and hamsters. However, the pathophysiological role of chymase is not fully understood. Here, we report a causal role of chymase in diabetic nephropathy and the therapeutic effectiveness of chymase inhibition. In the present study, renal chymase expression was markedly upregulated in streptozotocin-induced diabetic hamsters. Oral administration of a specific chymase inhibitor, TEI-F00806, completely ameliorated proteinuria, the overexpression of transforming growth factor-β and fibronectin in glomeruli, and renal mesangial expansion, by normalizing the increase in intrarenal angiotensin II levels in diabetic hamsters independently of blood pressure levels. In contrast, ramipril did not show such sufficient effects. These effects occurred in parallel with improvements in superoxide production and expression of NAD(P)H oxidase components [NAD(P)H oxidase 4 and p22^phox] in glomeruli. This study showed for the first time that chymase inhibition may protect against elevated intrarenal angiotensin II levels, oxidative stress, and renal dysfunction in diabetes. These findings suggest that chymase offers a new therapeutic target for diabetic nephropathy.