Recent advances have improved our understanding of the renin‐angiotensin system (RAS). These have included the recognition that angiotensin (Ang)‐(1‐7) is a biologically active product of the RAS cascade. The identification of the ACE homologue ACE2, which forms Ang‐(1‐7) from Ang II, and the GPCR Mas as an Ang‐(1‐7) receptor have provided the necessary biochemical and molecular background and tools to study the biological significance of Ang‐(1‐7). Most available evidence supports a counter‐regulatory role for Ang‐(1‐7) by opposing many actions of Ang II on AT1 receptors, especially vasoconstriction and proliferation. Many studies have now shown that Ang‐(1‐7) by acting via Mas receptor exerts inhibitory effects on inflammation and on vascular and cellular growth mechanisms. Ang‐(1‐7) has also been shown to reduce key signalling pathways and molecules thought to be relevant for fibrogenesis. Here, we review recent findings related to the function of the ACE2/Ang‐(1‐7)/Mas axis and focus on the role of this axis in modifying processes associated with acute and chronic inflammation, including leukocyte influx, fibrogenesis and proliferation of certain cell types. More attention will be given to the involvement of the ACE2/Ang‐(1‐7)/Mas axis in the context of renal disease because of the known relevance of the RAS for the function of this organ and for the regulation of kidney inflammation and fibrosis. Taken together, this knowledge may help in paving the way for the development of novel treatments for chronic inflammatory and renal diseases.