We previously reported that supplementation with 17β-estradiol (E2) attenuates albuminuria, glomerulosclerosis, and tubulointerstitial fibrosis in diabetic nephropathy. The present study examined the mechanisms by which E2 regulates extracellular matrix (ECM) metabolism, a process that contributes to the development of glomerulosclerosis and tubulointerstitial fibrosis. The study was performed in female nondiabetic (ND), streptozotocin-induced diabetic (D), and diabetic with E2 supplementation (D+E2) Sprague-Dawley rats for 12 wk. Diabetes was associated with an increase in the renal expression of collagen α type IV [ND, 0.22 ± 0.02; D, 0.99 ± 0.09 relative optical density (ROD); P < 0.05] and fibronectin protein (ND, 0.36 ± 0.08; D, 1.47 ± 0.08 ROD; P < 0.05), as measured by Western blot analysis. E2 supplementation partially attenuated this increase in collagen α type IV (D+E2, 0.47 ± 0.10 ROD) and fibronectin (D+E2, 0.71 ± 0.16 ROD) protein expression associated with D. Diabetes was also associated with a decrease in the expression of matrix metalloproteinase (MMP) isoform MMP-2 (ND, 0.79 ± 0.01; D, 0.62 ± 0.06 ROD; P < 0.05) and MMP-9 protein (ND, 0.49 ± 0.02; D, 0.33 ± 0.03 ROD; P < 0.05). E2 supplementation restored MMP-2 and MMP-9 protein to levels similar or even greater than in the ND kidneys (MMP-2, 0.75 ± 0.06; MMP-9, 0.73 ± 0.01 ROD). The activities of MMP-2 (ND, 7.88 ± 0.44; D, 5.60 ± 0.54 ROD; P < 0.05) and MMP-9 (ND, 29.9 ± 1.8; D, 12.9 ± 2.3 ROD; P < 0.05), as measured by zymography, were also decreased with D. E2 supplementation restored MMP-2 and MMP-9 activity to levels similar to that in ND kidneys (MMP-2, 7.66 ± 0.35; MMP-9, 21.4 ± 2.9 ROD). We conclude that E2 supplementation is renoprotective by attenuating glomerulosclerosis and tubulointerstitial fibrosis by reducing ECM synthesis and increasing ECM degradation.