Diabetes is manifested predominantly in males in experimental models, and compelling evidence suggests that 17β-estradiol (E2) supplementation improves hyperglycemia in humans. We previously generated a severely diabetic transgenic (Tg) mouse model by β-cell–specific overexpression of inducible cAMP early repressor (ICER) and found that male but not female ICER-Tg mice exhibit sustained hyperglycemia and develop major clinical and pathologic features of human diabetic nephropathy (DN). Thus, we hypothesized that differences in circulating hormone levels have a key role in determining susceptibility to diabetes. Here, we examined whether DN in male ICER-Tg mice is rescued by adjusting the androgen-to-E2 ratio to approximate that in normoglycemic female ICER-Tg mice. We treated hyperglycemic male ICER-Tg mice with orchiectomy (ORX), E2 pellet implantation, or both. E2 pellet implantation at an early stage of DN with or without ORX caused a rapid drop in blood glucose and a dramatic increase in β-cell number, and it markedly inhibited DN progression [namely, E2 reduced glomerulosclerosis, collagen 4 deposition and albuminuria, and prevented hyperfiltration]. Furthermore, E2 pellet implantation was more effective than ORX alone and induced a remarkable improvement, even when initiated at advanced-stage DN. In contrast, induction of normoglycemia by islet transplant in ICER-Tg mice eliminated albuminuria but was less effective than E2 + ORX in reducing glomerulosclerosis, collagen 4 deposition, and hyperfiltration. These findings indicate that E2 treatment is effective, even after establishment of DN, whereas glucose normalization alone does not improve sclerotic lesions. We propose that E2 intervention is a potential therapeutic option for DN.