Long noncoding RNA taurine-upregulated gene 1 (lncRNA TUG1) has been reported to play a key role in the progression of diabetic nephropathy (DN). However, the role of lncRNA TUG1 in the regulation of diabetic nephropathy remains largely unknown. The aim of the present study is to identify the regulation of lncRNA TUG1 on extracellular matrix accumulation via mediating microRNA-377 targeting of PPARγ, and investigate the underlying mechanisms in progression of DN. Microarray was performed to screen differentially expressed miRNAs in db/db DN mice. Afterwards, computational prediction programs (TargetScan, miRanda, PicTar and miRGen) was applied to predict the target gene of miRNAs. The complementary binding of miRNA and lncRNA was assessed by luciferase assays. Protein and mRNA expression were detected by western blot and real time quantitate PCR. MiRNA-377 was screened by miRNA microarray and differentially up-regulated in db/db DN mice. PPARγ was predicted to be the target of miR-377 and the prediction was verified by luciferase assays. Expression of miR-377 was up-regulated in mesangial cell treated with high glucose (25 mM), and overexpression of miR-377 inhibited PPARγ expression and promoted PAI-1 and TGF-β1 expression. The expression of TUG1 antagonized the effect of miR-377 on the downregulation of its target PPARγ and inhibited extracellular matrix accumulation, including PAI-1, TGF-β1, fibronectin (FN) and collagen IV (Col IV), induced by high glucose. LncRNA TUG1 acts as an endogenous sponge of miR-377 and downregulates miR-377 expression levels, and thereby relieving the inhibition of its target gene PPARγ and alleviates extracellular matrix accumulation of mesangial cells, which provides a novel insight of diabetic nephropathy pathogenesis. •MiR-377 is up-regulated in db/db DN mice.•MiR-377 suppresses its target gene PPARγ expression.•LncRNA TUG1 acts as an endogenous sponge of miR-377.•LncRNA TUG1 alleviates extracellular matrix accumulation of mesangial cells.