Endothelial dysfunction plays a key role in the pathogenesis of diabetic vascular disease, including diabetic nephropathy. Endothelial-derived nitric oxide synthase (eNOS) gene polymorphisms affect eNOS activity and are associated with endothelial dysfunction. We evaluated the association of the constitutive endothelial nitric oxide synthase gene (eNOS) polymorphisms with type 2 diabetic nephropathy. We genotyped three polymorphisms of eNOS (Two SNPs: −786T > C, 894G > T and one 27-bp repeat polymorphism in Intron 4 (27VNTR)) in type 2 diabetic nephropathy patients (cases: n = 195) and type 2 diabetic without nephropathy (controls: n = 255), using validated PCR-RFLP assays. We measured serum NO levels in these subjects and examined its correlation with diabetic nephropathy and eNOS genotypes. The frequency of CC (−786T > C), TT (894G > T) and aa genotypes (27VNTR) were significantly higher in diabetic nephropathy patients as compared to the diabetes without nephropathy group (CC: P = 0.003, TT: P = 0.03, aa: P < 0.0001). These mutant genotypes were found to be associated with higher risk of nephropathy (−786T > C: OR: 5.5, 95%CI: 1.53–19.79; 894G > T: OR: 1.8, 95%CI: 1.03–3.16; Intron 4: OR: 6.23, 95%CI: 2.23–16.31). Haplotype with all the wild alleles (T-b-G) was found to be associated with a decreased risk of nephropathy (OR: 0.68, P = 0.005) and haplotype with all mutant alleles (C-a-T) was associated with higher risk of diabetic nephropathy as compared to diabetes without nephropathy group (OR: 2.6, P = 0.14). No significant linkage disequilibria were observed among the variants in this case–control study. The serum NO levels were observed to be significantly (P < 0.05) lower in mutant allele carriers (‘C’ allele of T-786C SNP and/or ‘T’ allele of G894T SNP) as compared with the wild-type allele carriers (−786T and/or 894G) within each of the subject groups (with and without nephropathy). These results suggest that the eNOS gene locus is associated with diabetic nephropathy and the functional polymorphisms (−786T > C & 894G > T) might lead to a decreased expression of eNOS gene.