BMP, activin, membrane-bound inhibitor (BAMBI) acts as a pseudo-receptor for the transforming growth factor (TGF)-β type I receptor family and a negative modulator of TGF-β kinase signaling, and BAMBI-/- mice show mild endothelial dysfunction. Because diabetic glomerular disease is associated with TGF-β overexpression and microvascular alterations, we examined the effect of diabetes on glomerular BAMBI mRNA levels. In isolated glomeruli from biopsies of patients with diabetic nephropathy and in glomeruli from mice with type 2 diabetes, BAMBI was downregulated. We then examined the effects of BAMBI deletion on streptozotocin-induced diabetic glomerulopathy in mice. BAMBI-/- mice developed more albuminuria, with a widening of foot processes, than BAMBI+/+ mice, along with increased activation of alternative TGF-β pathways such as extracellular signal-related kinase (ERK)1/2 and Smad1/5 in glomeruli and cortices of BAMBI-/- mice. Vegfr2 and Angpt1, genes controlling glomerular endothelial stability, were downmodulated in glomeruli from BAMBI-/- mice with diabetes. Incubation of glomeruli from nondiabetic BAMBI+/+ or BAMBI-/- mice with TGF-β resulted in the downregulation of Vegfr2 and Angpt1, effects that were more pronounced in BAMBI-/- mice and were prevented by a MEK inhibitor. The downregulation of Vegfr2 in diabetes was localized to glomerular endothelial cells using a histone yellow reporter under the Vegfr2 promoter. Thus, BAMBI modulates the effects of diabetes on glomerular permselectivity in association with altered ERK1/2 and Smad1/5 signaling. Future therapeutic interventions with inhibitors of alternative TGF-β signaling may therefore be of interest in diabetic nephropathy.