Diabetic nephropathy (DN) is a prevalent chronic microvascular complication associated with diabetes mellitus and represents a major cause of chronic kidney disease and renal failure. Current treatment strategies for DN primarily focus on symptom alleviation, lacking effective approaches to halt or reverse DN progression. Circular RNA (circRNA), characterized by a closed-loop structure, has emerged as a novel non-coding RNA regulator of gene expression, attributed to its conservation, stability, specificity, and multifunctionality. Dysregulation of circRNA expression is closely associated with DN progression, whereby circRNA impacts kidney cell injury by modulating cell cycle, differentiation, cell death, as well as influencing the release of inflammatory factors and stromal fibronectin expression. Consequently, circRNA is considered a predictive biomarker and a potential therapeutic target for DN. This review provides an overview of the latest research progress in the classification, functions, monitoring methods, and databases related to circRNA. The paper focuses on elucidating the impact and underlying mechanisms of circRNA on kidney cells under diabetic conditions, aiming to offer novel insights into the prevention, diagnosis, and treatment of DN.