ACE2, initially cloned from a human heart, is a recently described homologue of angiotensin-converting enzyme (ACE) but contains only a single enzymatic site that catalyzes the cleavage of angiotensin I to angiotensin 1–9 [Ang(1–9)] and is not inhibited by classic ACE inhibitors. It also converts angiotensin II to Ang(1–7). Although the role of ACE2 in the regulation of the renin-angiotensin system is not known, the renin-angiotensin system has been implicated in the pathogenesis of diabetic complications and in particular in diabetic nephropathy. Therefore, the aim of this study was to assess the possible involvement of this new enzyme in the kidney from diabetic Sprague-Dawley rats to compare and contrast it to ACE. ACE2 and ACE gene and protein expression were measured in the kidney after 24 weeks of streptozocin diabetes. ACE2 and ACE mRNA levels were decreased in diabetic renal tubules by ≈50% and were not influenced by ACE inhibitor treatment with ramipril. By immunostaining, both ACE2 and ACE protein were localized predominantly to renal tubules. In the diabetic kidney, there was reduced ACE2 protein expression that was prevented by ACE inhibitor therapy. The identification of ACE2 in the kidney, its modulation in diabetes, and the recent description that this enzyme plays a biological role in the generation and degradation of various angiotensin peptides provides a rationale to further explore the role of this enzyme in various pathophysiological states including diabetic complications.