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Background: Diabetic patients with chronic kidney disease (CKD), as defined by a reduced glomerular filtration rate (GFR), are at greater risk for cardiovascular and renal events and mortality. The aim of this study was to determine the prevalence of CKD among diabetic patients attending a hospital in southern Ethiopia, and to assess underdiagnosis of renal insufficiency among those with normal serum creatinine., Methods: A total of 214 randomly selected diabetics attending the follow-up clinic at Butajira hospital of southern Ethiopia participated in this study during the period from September 1 to October 31, 2013. All patients completed an interviewer-administered questionnaire and underwent clinical assessment. The simplified Modification of Diet in Renal Disease (MDRD) and Cockroft-Gault (C-G) equations were used to estimate GFR (eGFR) from serum creatinine., Results: CKD, defined as eGFR<60 ml/min/1.73 m2, was present in 18.2% and 23.8% of the study participants according to the MDRD and Cockcroft-Gault (C-G) equations, respectively. Only 9.8% of the total participants, and 48.7% (for the MDRD) and 37.3% (for C-G) of those with eGFR<60 ml/min/1.73 m2 had abnormal serum creatinine values, i.e. >1.5 mg/dl. Normal serum creatinine was observed in 90.2% of participants attending the hospital. A large proportion of participants ranging from 38.9-56.5% have shown to have mild to moderate renal insufficiency (stage 2-3 CKD) despite normal creatinine levels. CKD, eGFR<60 ml/min/1.73 m2, was found in 10.4 and 16.9% of participants with normal serum creatinine using the MDRD and C-G equations, respectively., Conclusion: CKD is present in no less than 18% of diabetics attending the hospital, but it is usually undiagnosed. A significant number of diabetics have renal insufficiency corresponding to stages 2-3 CKD despite normal creatinine levels. Therefore, GFR should be considered as an estimate of renal insufficiency, regardless of serum creatinine levels being in normal range.