Diabetic nephropathy (DN) is one of the leading causes of end-stage renal disease (ESRD). The development and progression of nephropathy is strongly determined by genetic factors, and few genes have been shown to contribute to DN. An insertion/deletion (I/D) polymorphism of the gene encoding angiotensin-converting enzyme (ACE) was reported as a candidate gene predisposing to DN and ESRD. Accordingly, we investigated the frequency of ACE I/D polymorphism in 50 patients with DN, of whom 33 had ESRD and compared them with 64 patients with type 2 diabetes mellitus (T2DM) but with normal renal function. Polymerase chain reaction amplification, using specific primers, was performed to genotype ACE I/D. Chi-square test was used to assess the differences between the groups. The frequencies of the ACE genotypes were as follows: 48% D/D, 40% I/D, and 12% I/I in patients with DN in contrast to 32.8% D/D, 45.3% I/D, and 21.9% I/I in T2DM. The distribution of the D/D, D/I, and I/I genotypes did not significantly differ between T2DM and DN. However, having the D allele carried a risk for the development of DN [odds ratio (OD), 1.71, P = 0.054]. On the other hand, the distribution of the D/D, D/I, and I/I genotypes was significantly different between T2DM and ESRD patients, χ2 = 7.23, P = 0.027. This was reflected by the D allele which carried a risk for the development of ESRD (OR, 2.51, P = 0.0057). These findings suggest that the D allele may be considered as a risk factor for both the development of DN and the progression of DN to ESRD in Lebanese population with T2DM.