The role of altered renal oxygen metabolism resulting in hypoxia has emerged as a unifying pathway for several conditions associated with the development of kidney dysfunction, including diabetes. The kidney is unique in the sense that increasing oxygen delivery, i.e. blood flow, not necessarily will result in increased oxygenation since renal blood flow also influences the glomerular filtration rate, and thus also the energy demand for tubular sodium transport. This is in vast contrast to e.g. the brain were an increased oxygen demand rapidly is compensated by a similar increase in blood flow. We have just recently started to understand the intricate balance between oxygen utilization and oxygen supply in the kidney and the role of tissue hypoxia for the development of kidney function. Interestingly, the tissue hypoxia in the diabetic kidney does not result in activation of the HIF system, and the mechanism is likely to involve increased oxidative stress. However, we have recent data showing that activating the HIF system may be protective against diabetes-induced proteinuria, tubulointerstitial fibrosis and tissue hypoxia. Thus, activation of the HIF system might be protective during conditions of elevated oxidative stress and the concomitant increased kidney oxygen usage.