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Diabetic nephropathy (DN) is one of the leading causes of end-stage renal diseases worldwide. This study is designed to investigate the underlying function and mechanism of a novel lncRNA GAS5 in the progression of DN. We found that lncRNA GAS5 expression level was decreased in type 2 diabetes (T2D) with DN compared with that in patients without DN. Moreover, lncRNA GAS5 expression level was negatively associated with the severity of DN-related complications. lncRNA GAS5 inhibited MCs proliferation and caused G0/1 phase arrest. lncRNA GAS5 overexpression alleviated the expression of fibrosis-related protein in mesangial cells (MCs). The dual-luciferase reporter assay and RNA binding protein immunoprecipitation (RIP) assay results revealed that lncRNA GAS5 functions as an endogenous sponge for miR-221 via both the directly targeting way and Ago2-dependent manner. Furthermore, SIRT1 was confirmed as a target gene of miR-221. lncRNA GAS5 upregulated SIRT1 expression and inhibited MCs proliferation and fibrosis by acting as an miR-221 sponge. Finally, we found that lncRNA GSA5 suppressed the development of DN in vivo. Thus, lncRNA GAS5 was involved in the progression of DN by sponging miR-221 and contributed to lncRNA-directed diagnostics and therapeutics in DN.