Despite improvements during the past 20 years in blood glucose and blood pressure control, diabetic kidney disease remains one of the most important causes of health problems in patients with diabetes. Novel treatments to complement blood glucose and blood pressure control are urgently needed. The goal of this study is to see whether a medication called allopurinol may help prevent loss of kidney function among people with type 1 diabetes. Allopurinol has been used for many years to decrease high blood uric acid and treat gout - a disease characterized by arthritis, especially of the foot joints. There is evidence suggesting that allopurinol might also be useful in people with diabetes who have normal or moderately impaired kidney function to decrease the risk of developing advanced kidney disease in the future. To prove this beneficial effect of allopurinol, we will be conducting an international clinical trial at eight diabetes centers, enrolling approximately 480 patients with type 1 diabetes who are at increased risk of developing kidney disease. Participants will be randomly assigned to take allopurinol or placebo (inactive pill) for three years, during which they will be followed through periodical visits. To prevent any possible bias, neither the participants nor the clinical staff knows who is taking allopurinol and who is taking the placebo. Kidney function will be measured at the beginning and at the end of the treatment period to see whether patients taking allopurinol experience a slower loss of kidney function over time as compared to those taking the inactive pill. If this trial is successful, the reduction in health problems resulting from the prevention or delay of kidney function loss due to the use of allopurinol would have a major impact on the lives of type 1 diabetic patients as well as on society at large, significantly reducing the human and financial costs associated with diabetic kidney disease. Because of the emphasis on early intervention, the proposed trial, if successful, will establish a new paradigm in treatments to slow or prevent progression towards end stage kidney disease in type 1 diabetes far beyond anything achieved to date.