Angiotensin-converting enzyme-2 (ACE2) is downregulated in hypertensive nephropathy. The present study investigated the mechanisms whereby loss of ACE2 promoted angiotensin II–induced hypertensive nephropathy in ACE2 gene knockout mice. We found that compared with wild-type animals, mice lacking ACE2 developed much more severe hypertensive nephropathy in response to chronic angiotensin II infusion, including higher levels of blood pressure, urinary protein excretion, serum creatinine, and progressive renal fibrosis and inflammation. Mechanistic studies revealed that worsening kidney injury in ACE2 knockout mice was associated with an increase in Smurf2 (Smad-specific E3 ubiquitin protein ligase 2), a decrease in renal Smad7, and marked activation of TGF-β (transforming growth factor β)/Smad3 and NF-κB (nuclear factor κ-light-chain-enhancer of activated B cells) signaling, suggesting that Smurf2-dependent Smad7 ubiquitin degradation may be a key mechanism whereby loss of ACE2 promotes angiotensin II–induced TGF-β/Smad3 and NF-κB–mediated hypertensive nephropathy. This was validated by restoring Smad7 locally in the kidneys of ACE2 knockout mice to block angiotensin II–induced TGF-β/Smad3-mediated renal fibrosis and NF-κB–driven renal inflammation. Moreover, we found that angiotensin II could induce microRNA-21 in the mouse kidney and in cultured mesangial cells via a Smad3-dependent mechanism, which was enhanced by deleting ACE2 but inhibited by overexpressing renal Smad7. In conclusion, loss of ACE2 promotes angiotensin II–induced renal injury by targeting Smad7 for degradation via a Smurf2-dependent mechanism. Overexpression of renal Smad7 protects against hypertensive nephropathy by inactivating angiotensin II–induced TGF-β/Smad3 and NF-κB pathways and by targeting the Smad3-dependent microRNA-21 axis.