Diabetic Kidney Disease (DKD) is the leading cause of end-stage renal disease (ESRD) worldwide. Among individuals with type 1 diabetes mellitus (T1DM), 30–40% are at risk of developing DKD. This review focuses on the mechanistic processes, available and emerging biomarkers for diagnosing, monitoring, and preventing DKD, as well as treatment options targeted at DKD patients. A literature search was conducted on PubMed and Scopus using specific keywords. Inclusion and exclusion criteria were applied to select the articles used for this review. The literature highlights various mechanisms involved in the progression of DKD to more severe stages. Additionally, several biomarkers have been identified, which aid in diagnosing and monitoring the disease. Furthermore, numerous treatment approaches are being explored to address the underlying causes of DKD. Advanced research is exploring new medications to aid in DKD remission; sodium-glucose cotransport (SGLT2) inhibitors and finerenone, in particular, are gaining attention for their novel renoprotective effects. DKD is a major complication of diabetes, marked by complex and multifactorial mechanisms. Thus, understanding these processes is essential for developing targeted therapies to potentially reverse DKD progression. Biomarkers show promise for early diagnosis and monitoring of disease progression, while current treatment strategies underscore the importance of a multifaceted approach.