In search of genetic determinants of susceptibility to diabetic nephropathy, we examined the association between DNA sequence differences at the locus of angiotensin I-converting enzyme (ACE) and renal complications in 151 insulin-dependent diabetes mellitus (IDDM) patients with a diabetes duration of 16–21 years. This nested case-control study included 77 normoalbuminuric control subjects (albumin excretion rate <30 μg/min) and 74 cases with evidence of nephropathy ranging from microalbuminuria to overt proteinuria. DNA from each of these patients was genotyped at the ACE locus by a three-allele restriction fragment-melting polymorphism (RFMP) (Dde I), which we described recently, and a two-allele insertion/deletion recognized as an Xba I restriction fragment-length polymorphism, which has been shown by other investigators to be associated with serum levels of ACE and with risk of myocardial infarction. The least common allele of the Dde I RFMP was significantly more frequent among cases with nephropathy than among normoalbuminuric control subjects (12.8 vs. 4.5%, P < 0.05). The deletion in the ACE gene was also more frequent in case than in control subjects (56.1 vs. 47.4%), but the difference was not statistically significant (P < 0.25) with this sample size. To determine the independence of these associations, the two polymorphisms were analyzed jointly to identify Xba I/Dde I haplotypes. As might be expected, carriers of the Xba I/Dde I ′+ =′ haplotype had a fourfold risk of developing diabetic nephropathy (odds ratio [OR] 4.0, 95% confidence interval [CI] 1.5–11.0). However, this did not explain all of the excess Xba I ′+′ allele among cases. Carriers of the ′++′ haplotype were also more frequent among cases (OR 2.0, 95% CI 0.8–4.9), but this association was not statistically significant with this sample size. This study provides evidence that DNA sequence differences in the ACE gene may contribute to genetic susceptibility to diabetic nephropathy in IDDM.