Progressive renal function decline begins in one third of patients with microalbuminuria and type 1 diabetes. This study examined whether this decline is associated with elevated excretion of inflammatory markers in urine. Five inflammatory markers (IL-6, IL-8, monocyte chemoattractant protein-1, interferon-gamma-inducible protein (IP-10), and macrophage inflammatory protein-1δ) were measured in urine samples from the First Joslin Study of the Natural History of Microalbuminuria in Type 1 Diabetes, a cohort recruited in 1991. Samples were obtained from 43 participants with microalbuminuria and stable renal function (nondecliners), from 28 with microalbuminuria and early progressive renal function decline (decliners), and from 74 with normoalbuminuria and stable renal function (reference). Urinary concentrations of all five inflammatory markers were significantly higher in decliners than in nondecliners, who were similar to the reference group. Multivariate analysis revealed that those with more than two markers elevated were more than five times as likely to have early progressive decline of renal function. In contrast, serum concentrations of C-reactive protein, IL-8, and macrophage inflammatory protein-1δ did not differ between decliners and nondecliners. These results support the hypothesis that inflammatory processes in the kidney contribute to the progression of nephropathy in patients with type 1 diabetes