Type 2 diabetes mellitus which is an universal public health problem is associated with the development of micro- and macrovascular complications. Complications of diabetes on eyes, kidneys and nerves are well documented but studies on lung involvement in diabetes and its correlation with nephropathy are sparse. This study was taken to assess pulmonary functions in patients with diabetic nephropathy and to find out correlation of pulmonary function with duration of diabetes and assess the prevalence pulmonary hypertension in patients with nephropathy.This was a cross-sectional study which included 50 diabetic subjects, 50 diabetics with overt nephropathy, and 50 healthy subjects without diabetes as the control group. Diabetic subjects were matched to the control group in terms of age, sex, and BMI. Pulmonary function tests were performed and the results were compared between groups. Pulmonary artery pressures were assessed by 2D ECHO and results were interpreted using SPSS 21.0 version for windows.Mean FEV 1% was 98.12 (+/-10.06), 75.88 (+/-14.10) and 57.64 (+/-13.49), Mean FVC% was 86.78 (+/- 8.77), 69.82(+/-13.88) and 53.02(+/-13.41), The mean PEF% was 88.62 (+/-14.47), 59.40 (+/-18.59) and 48.96 (+/-20.94) among healthy subjects with no diabetes, diabetes mellitus group and diabetic nephropathy group respectively and the difference observed was statistically significant (p value <0.001). Restrictive pattern of lung function impairment was observed in diabetic patients which was more pronounced in Diabetic nephropathy group. Mean FEV1% was 71.03 (+/-13.19), 66.74 (+/-18.34) and 60.29 (+/-15.25),Mean FVC% was 65.66 (+/-11.06), 60.79 (+/-18.00) and 56.38 (+/-16.55) was observed among the participants having diabetes less than 10yrs, 10 to 20 years and > 20 years respectively. The difference in mean FEV1%, FVC % with duration of DM was not statistically significant. PAH was present in 3 patients (6%) in diabetes mellitus group and in 20 (40%) in diabetes nephropathy group and the difference observed was statistically significant p < 0.0001. FEV1, FVC and PEF % were significantly reduced in PAH group when compared to the No PAH group with p values <0.0001.This study showed that Pulmonary function tests are impaired in diabetics, showing a restrictive pattern and impairment was pronounced in diabetics with nephropathy. Derangement of pulmonary functions was independent of duration of diabetes. Pulmonary hypertension was more common in diabetic nephropathy group.