Diabetic nephropathy (DN) is resulted from activations of polyol pathway and oxidative stress by abnormal metabolism of glucose, and no specific medication is available. We designed a novel class of benzoxazolone derivatives, and a number of individuals were found to have significant antioxidant activity and inhibition of aldose reductase of the key enzyme in the polyol pathway. The outstanding compound (E)-2-(7-(4-hydroxy-3-methoxystyryl)-2-oxobenzo[d]oxazol-3(2H)-yl)acetic acid was identified to reduce urinary proteins in diabetic mice suggesting an alleviation in the diabetic nephropathy, and this was confirmed by kidney hematoxylin-eosin staining. Further investigations showed blood glucose normalization, declined in the polyol pathway and lipid peroxides, and raised glutathione and superoxide dismutase activity. Thus, we suggest a therapeutic function of the compound for DN which could be attributed to the combination of hypoglycemic, aldose reductase inhibition and antioxidant.