Offspring of diabetic mothers experience an increased risk for type 2 diabetes but it is not known whether diabetic pregnancies also confer a higher inter-generational risk for diabetic complications. Because microalbuminuria is a sensitive indicator of glomerular damage, we compared the urine albumin:creatinine ratios (ACRs) between 65 infants of diabetic mothers (InfDM+) and 59 infants of non-diabetic mothers (InfDM−), and repeated the comparisons in 21 InfDM+ and 19 InfDM− when children were 5–19 months old. ACRs were higher among neonates compared with normal reference values for adults, but declined with increasing age. The only independent predictor of higher ACRs in a logistic regression model (⩾13 mg/mmol v. <13 mg/mmol) was the presence of delivery complications (odds ratio 2.95; P = 0.015). Neither high nor low birth weight was associated with higher neonatal ACRs. The most unique finding of the study was that InfDM+ had significantly lower ACRs than InfDM− [mean = 12.9 (median = 6.0) v. mean = 16.6 (median = 11.5), respectively at P = 0.05] even after adjusting for other variables using logistic regression (odds ratio 0.25; P = 0.001). In contrast, by 5–19 months, there was a trend toward higher ACRs among InfDM+ compared with InfDM− [mean = 6.3 mg/mmol (median = 1.9) v. mean = 3.0 mg/mmol (median = 2.5), respectively at P = 0.25]. Lower ACRs in InfDM+ may be due to developmental changes in fetal kidneys induced by hyperinsulinemia. Although the implications of this observation are unclear, it is possible that exposure to a diabetic intrauterine environment might influence the later risk for renal disease.