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OBJECTIVE: To evaluate putative risk factors for the development of incipient diabetic nephropathy (persistent microalbuminuria) and overt diabetic nephropathy (persistent macroalbuminuria) in patients with non-insulin dependent diabetes. DESIGN: Prospective, observational study of a cohort of white, non-insulin dependent diabetic patients followed for a median period of 5.8 years. SETTING: Outpatient clinic in tertiary referral centre. SUBJECTS: 191 patients aged under 66 years with non-insulin dependent diabetes and normoalbuminuria (urinary albumin excretion rate < 30 mg/24 h) who attended the clinic during 1987. MAIN OUTCOME MEASURES: Incipient and overt diabetic nephropathy. RESULTS: Fifteen patients were lost to follow up. Thirty six of the 176 remaining developed persistent microalbuminuria (30-299 mg/24 h in two out of three consecutive 24 hour urine collections) and five developed persistent macroalbuminuria (> or = mg/24 h in two out of three consecutive collections) during follow up. The five year cumulative incidence of incipient diabetic nephropathy was 23% (95% confidence interval 17% to 30%). Cox's multiple stepwise regression analysis revealed the following risk factors for the development of incipient or overt diabetic nephropathy: increased baseline log urinary albumin excretion rate (relative risk 11.1 (3.4 to 35.9); P < 0.0001); male sex (2.6 (1.2 to 5.4); P < 0.02); presence of retinopathy (2.4 (1.3 to 4.7); P < 0.01); increased serum cholesterol concentration (1.4 (1.1 to 1.7); P < 0.01); haemoglobin A1c concentration (1.2 (1.0 to 1.4); P < 0.05); and age (1.07 (1.02 to 1.12); P < 0.01). Known duration of diabetes, body mass index, arterial blood pressure, serum creatinine concentration, pre-existing coronary heart disease, and history of smoking were not risk factors. CONCLUSION: Several potentially modifiable risk factors predict the development of incipient and overt diabetic nephropathy in normoalbuminuric patients with non-insulin dependent diabetes.