The effects of heat-processed ginseng (HPG) and ginsenoside 20(S)-Rg3 on the progression of renal damage in type 2 diabetic rats were investigated. Twenty-two-week-old male Otsuka Long-Evans Tokushima Fatty (OLETF) rats were divided into 4 orally administered groups: vehicle (diabetic control), HPG water extract (100 mg/kg) and 20(S)-Rg3 (5, 10 mg/kg). Non-diabetic Long-Evans Tokushima Otsuka (LETO) rats were used as a normal group. OLETF rats showed markedly higher blood glucose, triglyceride, and total cholesterol levels than those of LETO rats. The elevated blood glucose level of OLETF rats was significantly lowered by 20(S)-Rg3 administration. The elevated serum triglyceride and total cholesterol levels were significantly reduced by the administrations of HPG and 20(S)-Rg3. The serum levels of thiobarbituric acid-reactive substance, an index of lipid peroxidation, were markedly increased in OLETF compared to LETO rats, but it was significantly reduced by HPG and 20(S)-Rg3 administrations. The urinary protein level, an indicator of advanced diabetic nephropathy, of OLETF rats was 4.4 times higher than in LETO rats, but it was reduced significantly by the administrations of HPG and 20(S)-Rg3. Creatinine clearance of OLETF rats was significantly increased after HPG and 20(S)-Rg3 administrations. The elevation of inducible nitric oxide synthase and Nε-(carboxymethyl)lysine protein expressions in renal tissues of OLETF rats was prevented by 20(S)-Rg3 administration. This study provides scientific evidence that 20(S)-Rg3 prevents the progression of renal damage and dysfunction in type 2 diabetic rats via inhibiting oxidative stress and advanced glycation endproduct formation.