Genetic predisposition has been proposed to be a major determinant in the development of renal complications of diabetes. Among candidate genes examined for susceptibility to diabetic nephropathy, angiotensin-converting enzyme (ACE) gene has been found to be associated with pathogenesis and progression of diabetic nephropathy. However, the role of other renin-angiotensin system (RAS) polymorphisms and their possible interactions with different ACE I/D genotypes are less clearly defined. Recent studies also show that ACE haplotypes may be better predictors to disease susceptibility. Thus, in the present study, we evaluated the association of ACE haplotypes and the interactions of ACE, angiotensinogen (AGT), and angiotensin II receptor type I (AGTR1) gene polymorphisms with DNP in Asian Indians. We genotyped seven variants of the RAS pathway genes (ACE, AGT, and AGTR1) in type 2 diabetic cohorts without nephropathy (DM) and with nephropathy (DNP), using allele-specific oligonucleotide-PCR, and PCR-restriction fragment length polymorphism assays. We studied the interaction of these variants with each other and ACE I/D polymorphism. Frequency of ACE D allele and DD genotype (ACE I/D) was significantly higher in DNP (p < 0.005) and was associated with increased risk of nephropathy. The frequency of T allele, MT/TT genotypes (AGT: M235T), and C allele 1166CC genotype (AGTR1: A1166C) was higher and associated with increased risk of DNP (235T, p < 0.0001; 235TT/MT, p < 0.01; 1166C, p < 0.007; 1166CC, p < 0.0001). The ACE locus revealed a near doubling in the prevalence of T-D-G risk haplotype (odds ratio, 1.76) in DNP (0.13) compared to DM (0.08; p < 0.02). ACE haplotypes carrying the I allele were associated with a lower risk of DNP (C-I-A, p < 0.04; C-I-G, p < 0.008). ACE ID/DD genotypes in combination with ACE rs4311, rs4343, and AGT rs699 mutant genotypes increased the risk of DNP development fourfold (p < 0.01). This study provides the first evidence for a disease haplotype for DNP at the ACE locus in Asian Indians. The study further indicates that ACE D allele individually and in interaction with other RAS single-nucleotide polymorphisms significantly increases the risk of nephropathy in type 2 diabetic patients of Asian Indian origin.