To explore the effects and underlying mechanisms of Panax notoginoside (PNS) on the nephropathy in rats with type 1 diabetes. A murine model of diabetic nephropathy was set up by an intravenous injection of streptozotocin (STZ). Wistar rats were randomly divided into 5 groups: the control group, the diabetic group (DM), the group treated with low-dosage PNS (PNS-L), the group treated with high-dosage PNS (PNS-H) and the group treated with catopril. Rats in the PNS-L and PNS-H groups were given different dosages of PNS while rats in the catopril group were given catopril through gastrogavage every day for the next four consecutive weeks. Serum creatinine (Cr) levels, endogenous creatinine clearance rate (CCr), and 24-h urinary microalbumin (UAlb) were examined and calculated. Meanwhile, immunohistochemistry was applied to determine the expression of vascular endothelial growth factor (VEGF) and bone morphogenetic protein-7 (BMP-7) in the kidney tissue. The levels of Cr, Ccr, and UAlb were all elevated significantly in the DM group (P < 0.01). The expression of VEGF protein was increased but BMP-7 protein was decreased in the kidney tissue (P < 0.01). However, the above items decreased in the PNS-L, PNS-H and catopril groups compared with the DM group (P < 0.05, P < 0.01). In the PNS-L, PNS-H and catopril groups, the expression of VEGF protein was decreased but BMP-7 protein was increased in the kidney tissue (P < 0.05, P < 0.01). PNS shows protective effects on the kidney in type 1 diabetic rats at the early stage. The protective mechanism might be closely related to its role of inhibiting the expression of VEGF protein and enhancing the expression of BMP-7 protein in the kidney.