Background: Higher-protein weight-loss diets (defined as >25% of energy as protein) are not recommended for individuals with type 2 diabetes because of their potential adverse effect on renal function. Objective: We aimed to examine the effect of such diets on renal function over 12 mo in people with type 2 diabetes and early renal disease. Design: Overweight and obese people with type 2 diabetes were screened to identify those with an albumin:creatinine ratio from 3 to 30 mg/mmol. Seventy-six subjects were randomly assigned to either a moderate-protein weight-loss diet or a standard-protein weightloss diet for 12 mo. The primary endpoint was the change in renal function as assessed by the isotope glomerular filtration rate (GFR), estimated GFR, and cystatin C. Forty-five subjects (moderate protein: n = 21; standard protein: n = 24) completed the study. Results: The mean (±SE) weight loss was not different between diets at 9.7 ± 13.4 kg for the moderate-protein diet and 6.6 ± 7.1 kg for the standard-protein diet. There were no changes in renal function or albuminuria or blood pressure, although glycated hemoglobin was lowered with both diets. Changes in renal function were related to the baseline estimated GFR. Patients with stage 1-3 renal disease (<120 mL · min21 · 1.73 m22; n = 33) had an improvement in renal function, whereas patients with hyperfiltration (>120 mL · min21 · 1.73 m22; n = 12) had a decrease in the GFR. After adjustment for weight loss, the baseline GFR remained a significant predictor of outcomes with no effect of dietary treatment. An average difference in protein intake between diets of 19 ± 6 g/d was achieved. Conclusion: Weight loss improved renal function, but differences in dietary protein had no effect. This trial was registered at the Australian and New Zealand Clinical Trial Register as ACTRN12608000045314.