With increasing incidences of diabetes, diabetic nephropathy (DN) becomes the leading cause of chronic kidney disease and end-stage (ESRD) renal disease worldwide. However, the current pharmacological treatments for glycemic control and inhibitors of the renin-angiotensin system cannot effectively prevent the progression of DN. Recent studies show that the chronic low-grade inflammation and activation of the immune system have emerged as a paramount role in the development and progression of DN. Understanding the inflammatory cascade and mechanisms in the progression of DN will enable identification of new potential targets and facilitate the design of innovation anti-inflammatory therapeutic strategies. Growing evidence has demonstrated that the treatment of Chinese herbal medicines for DN improves hyperglycemia and proteinuria interrupting progression to ESRD. Chinese herbal medicines including herbal formulas, single herbal medicines, extracts of herbs, and compounds from herb, have been proved to regulate inflammation in DN animal and cell line models. In this review, we focus on inflammatory molecules and pathways in relation to renal injury of DN, and discuss potential traditional Chinese medicine (TCM) strategies to treat DN via targeting inflammatory factors.