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The aim of this study is to clarify the conflicting results of the ∊2/∊3/∊4 APOE polymorphism as a risk factor on diabetic nephropathy by a cohort study.A total of 429 Japanese subjects with type 2 diabetes and with normoalbuminuria (n = 299) or with microalbuminuria (n = 130) were enrolled in a prospective observational follow-up study during 1995-1998 and followed until 2001 (for at least 3 years). The endpoint was the occurrence of a renal event defined as the progression to a higher stage of diabetic nephropathy.During the study (the mean follow-up period: 4.4 ± 1.0 years), 31 of 429 subjects progressed: 21 from normoalbuminuria to microalbuminuria and 10 from microalbuminuria to overt proteinuria. The allele frequency of the APOE polymorphism was significantly different between the progressors and the nonprogressors. Eight of 42 ∊2 carriers (19%) progressed, whereas 23 of 387 noncarriers (6%) progressed with a relative risk of 3.2 (95% CI 1.5-6.7). When subjects were stratified by renal status at baseline, each relative risk for the progression in the ∊2 carriers was 2.7 (0.99-7.4) in those with normoalbuminuria and 4.2 (1.3-13.3) in those with microalbuminuria. Furthermore, when analyzed only in subjects with normoalbuminuria and short duration of diabetes (<15 years) at baseline, the risk in the ∊2 carriers became higher to 3.2 (1.2-8.8).Our follow-up study indicates that the ∊2 allele of the APOE polymorphism is a prognostic risk factor for both the onset and the progression of diabetic nephropathy in Japanese type 2 diabetes.