Background: diabetes mellitus (DM) is a common metabolic disorder characterized by chronic hyperglycemia leading to significant morbidity and mortality as a result of the development of chronic macrovascular and microvascular complications. The onset of type 2 diabetes mellitus (T2DM) is often silent and insidious and this accounts for the relatively high prevalence of complications at initial presentation. Objective: The aim of the current study was to evaluate the urinary level of liver type-fatty acid binding protein (u-LFABP) as a proximal tubular damage biomarker in prediction or early detection of Diabetic nephropathy (DN) and whether its levels parallel the severity of kidney disease in type 2 diabetic patients, as assessed by the degree of albuminuria and other biochemical indices of renal dysfunction (e-GFR, serum creatinine and urea). Patients and Methods: the study was conducted on 69 diabetic patients and 20 age and sex- matched apparently healthy control subjects. All patients included in this study were recruited from the inpatient and outpatient Endocrinology Clinic, Al-Zahraa University Hospital, between October 2016 and April 2018. The enrolled patients included 37 women and 32 men with age ranged from 40 to 67. They were diagnosed as having type 2 diabetes mellitus (T2DM). Results: Statistical analysis of results presumed that u-L-FABP levels ˃37.2 and 92.2 ng/L were the optimum cutoff levels to discriminate micro- and macroalbuminuric diabetic patients from controls with 90% and 100% diagnostic specificity and 96% and 100% accuracy, respectively. In addition, u-L-FABP levels ˃ 28.5 and ˃386.1 ng/L, were the optimum cutoff values that predict the progression of microalbuminuria and macroalbuminuria with 100% diagnostic sensitivity and 87.9% and 99.7% accuracy, respectively. Conclusion: the use of u-L-FABP as a specific proximal tubular damage biomarker alone, or together with microalbumin, is beneficial for early diagnosis and monitoring of DN, compared to u- N-Acetyl-β-DGlucosaminidase (NAG) excretion.