Objective: To observe the clinical efficacy of compound “Lingzhi Jianshen Decoction” on expressions of AGT and IGF-1 in rats with diabetic nephropathy (DN), and to explore its mechanism. Methods Rat models with DN were established by injection of streptozotocin (STZ) and divided into the model group, treatment group and blank group. Treatment group was treated with compound “Lingzhi Jianshen Decoction”, and the others were treated with the same dose of distilled water. After 8 weeks, the general condition and biochemical indexes were observed, and the renal tissues were observed by immunohistochemical and pathological section. Levels of AGT and IGF-1 were detected by ELISA.  Results: ① Compared with the blank group, the body weight of the model group and treatment group were reduced markedly (P<0.01), and ratio of kidney wight to BMI, biochemical indexes, levels of AGT and IGF-1 were increased significantly (P<0.01). Pathological examination of kidney in rats showed glomerular hypertrophy, mesangial matrix proliferation, glomerular basement membrane thickening, tubular epithelial cell degeneration, protein cast formation in some renal tubules. The levels of AGT and IGF-1 in the kikdney were markedly increased. ② Compared with the model group, the body weight of the treatment group was remarkably increased (P<0.01), while the levels of 24 albuminuria, BUN, SCr and AGT and IGF-1 were reduced markedly, with significant difference between the two groups (P<0.05). The pathologic changes were much more alleviated in the treatment group than that of the modle group.  Conclusion: Compound “Lingzhi Jianshen Decoction” can protect the kidney function of diabetic nephropathy rats. Its mechanism may be association with the reducing expression of AGT and IGF-1 and inhibting activity of RAS.