The evaluation of diabetic nephropathy from research and clinical viewpoints depends on the assessment of two continuous variables, albumin excretion rate (AER) and glomerular filtration rate (GFR). These two parameters form the basis of both the European classification of five stages of diabetic nephropathy, assessed according to changes in AER and GFR (hyperfiltration, normoalbuminuria, microalbuminuria, macroalbuminuria and end-stage renal disease), and the National Kidney Foundation classification of five stages of chronic kidney disease based on categories of estimated GFR. Although increases in AER generally precede a decline in GFR, some patients follow a non-albuminuric pathway to renal impairment. In addition, studies indicate that GFR decreases in a linear fashion from normal or above-normal levels. Whether hyperfiltration is part of the pathogenetic process leading to diabetic nephropathy remains unclear. Ideally, both AER and GFR should be assessed at an early stage in patients being evaluated for diabetic nephropathy. New methods such as the use of cystatin-C-based equations for estimating GFR should be considered because current creatinine-based estimates are inaccurate at normal or high GFRs. Serial assessments of both AER and GFR might allow diabetic nephropathy to be diagnosed at early stages of the disease process that are selectively responsive to new interventions. The successful integration of AER categories with the recently defined stages of GFR represents a new challenge in the management of diabetic nephropathy.