Diabetic nephropathy is a growing public health challenge with implications on health. Renal function decline impacts the functional ability and overall health and well-being of individuals with diabetic nephropathy due to development of several renal manifestations. The objective of the study was to determine the effect of an exercise-based rehabilitation program on functional capacity and renal function among individuals with type 2 diabetic nephropathy. A total of 283 individuals were screened and 60 eligible participants aged 45-70 years with diabetic nephropathy were randomly allocated (n = 30 each) to the intervention group (IG) and control group (CG), respectively. The study outcome measures comprised of functional capacity (6-min walk test) and renal function assessed at baseline, 12th week and 24th week. Participants allocated to IG received 12 weeks of exercise based rehabilitation (comprising of supervised + home-based exercises) along with standard care and followed-up till 24th week. The repeated measures ANOVA with Greenhouse-Geisser correction indicated significant timepoint*group interaction effect for 6-min walk distance F  = 619, p < 0.001, serum creatinine F  = 174.8, p < 0.001, estimated glomerular filtration rate F  = 105.2, p < 0.001, serum urea F  = 261.4, p < 0.001 and urine protein F  = 4.58, p < 0.328. The study found that exercise based rehabilitation improved both functional capacity and renal function among individuals with type 2 diabetic nephropathy.