Diabetic nephropathy (DN) is a microvascular complication of diabetes mellitus. This study examined the therapeutic effects of sitagliptin, a dipeptidyl peptidase inhibitor, on DN and explored the underlying mechanism. Male Wistar albino rats (n = 12) were intraperitoneally administered a single dose of streptozotocin (30 mg/kg) to induce diabetes. Streptozotocin-treated and untreated rats (n = 12) were further divided into normal control, normal sitagliptin-treated control, diabetic control, and sitagliptin-treated diabetic groups (n = 6 in each). The normal and diabetic control groups received normal saline, whereas the sitagliptin-treated control and diabetic groups received sitagliptin (100 mg/kg, p.o.). We assessed the serum levels of DN and inflammatory biomarkers. Protein tyrosine phosphatase 1 B (PTP1B), phosphorylated Janus kinase 2 (P-JAK2), and phosphorylated signal transducer activator of transcription (P-STAT3) levels in kidney tissues were assessed using Western blotting, and kidney sections were examined histologically. Sitagliptin reduced DN and inflammatory biomarkers and the expression of PTP1B, p-JAK2, and p-STAT3 (p < 0.001) and improved streptozotocin-induced histological changes in the kidney. These results demonstrate that sitagliptin ameliorates inflammation by inhibiting DPP-4 and consequently modulating the PTP1B-related JAK/STAT axis, leading to the alleviation of DN.