Diabetic kidney disease (DKD) is a key microvascular complication of diabetes, with few therapies for targeting renal disease pathogenesis and progression. We performed transcriptional and protein studies on 103 unique blood and kidney tissue samples from patients with and without diabetes to understand the pathophysiology of DKD injury and its progression. The study was based on the use of 3 unique patient cohorts: peripheral blood mononuclear cell (PBMC) transcriptional studies were conducted on 30 patients with DKD with advancing kidney injury; Gene Expression Omnibus (GEO) data was downloaded, containing transcriptional measures from 51 microdissected glomerulous from patients with DKD. Additionally, 12 independent kidney tissue sections from patients with or without DKD were used for validation of target genes in diabetic kidney injury by kidney tissue immunohistochemistry and immunofluorescence. PBMC DKD transcriptional analysis, identified 853 genes (p < 0.05) with increasing expression with progression of albuminuria and kidney injury in patients with diabetes. GEO data was downloaded, normalized, and analyzed for significantly changed genes. Of the 325 significantly up regulated genes in DKD glomerulous (p < 0.05), 28 overlapped in PBMC and diabetic kidney, with perturbed FcER1 signaling as a significantly enriched canonical pathway. FcER1 was validated to be significantly increased in advanced DKD, where it was also seen to be specifically co-expressed in the kidney biopsy with tissue mast cells. In conclusion, we demonstrate how leveraging public and private human transcriptional datasets can discover and validate innate immunity and inflammation as key mechanistic pathways in DKD progression, and uncover FcER1 as a putative new DKD target for rational drug design.