Aim: The study was carried out to determine the five-year incidence of microalbuminuria and to assess its associated risk factors for type 2 diabetic patients in Isfahan, Iran. Methods: 505 type 2 diabetic patients (22% male, 78% female) with normal urinary albumin levels, being treated at Isfahan Endocrine and Metabolism Research Center, were consecutively selected. After the initial selection in 1999, the patients were followed for five years. Mean and standard deviation (SD) of age and duration of diabetes was 57.4 (9.5) and 10.2 (4.7) years, respectively. BMI, blood pressure, fasting plasma glucose, HbA1c, serum lipids and serum creatinine were measured and re-examined every three months. 24-h urinary albumin excretion was measured and reviewed annually. Microalbuminuria was diagnosed when at least two measurements indicated the excretion of more than 30 mg albumin in 24-h urinary samples. Results: During 5-year follow up, 176 patients developed microalbuminuria, giving an incidence rate of 82.3/1000 person/ year (95% CI: 78.3-86.2). Males had a higher incidence than females (104.4 vs. 66.2/1000 person/year, p < 0.001). Duration of diabetes, abnormal levels of HbA1c, hypertension and high serum creatinine were significantly associated with microalbuminuria. There was no difference in mean of age, BMI, and lipid levels between patients with and without microalbuminuria. Multivariate analysis was used to show that duration of diabetes, HbA1c, hypertension and retinopathy were the independent variables related to microalbuminuria. Conclusion: The incidence of microalbuminuria in the study population was higher than in other populations. The higher incidence and the considerable gender difference in this population may be attributed to inferior glycemic control and lack in screening for risk factors, but this needs to be explored in further studies.