Significance Diabetic nephropathy is the leading cause of chronic kidney disease in the United States, and one of the most significant long-term complications of both type 1 and type 2 diabetes, which currently lack fully effective therapy. Hyperglycemia and activation of the renin-angiotensin system (RAS) are thought to be the two main drivers of this pathology. We have recently shown that selective blockade of peripheral cannabinoid receptor-1 (CB ₁R) delayed and attenuated the development of type 2 diabetes in a rat model. Here we show that the nephropathy-inducing effects of both hyperglycemia and activation of the RAS involve CB ₁R activation in glomerular podocytes, and that antagonism of peripheral CB ₁R could represent a novel, effective, and rational approach to both prevent and reverse diabetic nephropathy. Diabetic nephropathy is a major cause of end-stage kidney disease, and overactivity of the endocannabinoid/cannabinoid 1 receptor (CB ₁R) system contributes to diabetes and its complications. Zucker diabetic fatty (ZDF) rats develop type 2 diabetic nephropathy with albuminuria, reduced glomerular filtration, activation of the renin-angiotensin system (RAS), oxidative/nitrative stress, podocyte loss, and increased CB ₁R expression in glomeruli. Peripheral CB ₁R blockade initiated in the prediabetic stage prevented these changes or reversed them when animals with fully developed diabetic nephropathy were treated. Treatment of diabetic ZDF rats with losartan, an angiotensin II receptor-1 (Agtr1) antagonist, attenuated the development of nephropathy and down-regulated renal cortical CB ₁R expression, without affecting the marked hyperglycemia. In cultured human podocytes, CB ₁R and desmin gene expression were increased and podocin and nephrin content were decreased by either the CB ₁R agonist arachydonoyl-2′-chloroethylamide, angiotensin II, or high glucose, and the effects of all three were antagonized by CB ₁R blockade or siRNA-mediated knockdown of CNR1 (the cannabinoid type 1 receptor gene). We conclude that increased CB ₁R signaling in podocytes contributes to the development of diabetic nephropathy and represents a common pathway through which both hyperglycemia and increased RAS activity exert their deleterious effects, highlighting the therapeutic potential of peripheral CB ₁R blockade.