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Diabetic kidney disease (DKD), a chronic kidney disease, is characterized by progressive fibrosis caused due to persistent hyperglycemia. The development of fibrosis in DKD determines the patient prognosis, but no particularly effective treatment. Here, small extracellular vesicles derived from mesenchymal stem cells (MSC-sEV) have been used to treat DKD fibrosis. Single-cell RNA sequencing was used to analyze 27,424 cells of the kidney, we have found that a novel fibrosis-associated TGF-β 1 + Arg1 + macrophage subpopulation, which expanded and polarized in DKD and was noted to be profibrogenic. Additionally, Actin + Col4a5 + mesangial cells in DKD differentiated into myofibroblasts. Multilineage ligand-receptor and cell-communication analysis showed that fibrosis-associated macrophages activated the TGF-β 1 /Smad2/3/YAP signal axis, which promotes mesangial fibrosis-like change and accelerates renal fibrosis niche. Subsequently, the transcriptome sequencing and LC-MS/MS analysis indicated that MSC-sEV intervention could restore the levels of the kinase ubiquitin system in DKD and attenuate renal interstitial fibrosis via delivering CK1δ/β-TRCP to mediate YAP ubiquitination degradation in mesangial cells. Our findings demonstrate the unique cellular and molecular mechanisms of MSC-sEV in treating the DKD fibrosis niche at a single-cell level and provide a novel therapeutic strategy for renal fibrosis., (© 2024. The Author(s).)