Background: Anemia is common and is associated with impaired clinical outcomes in diabetic chronic kidney disease (CKD). It may be explained by reduced erythropoietin (EPO) synthesis, but recent data suggest that EPO-resistance and diminished iron availability due to inflammation contribute significantly. In this cohort study, we evaluated the impact of hepcidin-25—the key hormone of iron-metabolism—on clinical outcomes in diabetic patients with CKD along with endogenous EPO levels. Methods: 249 diabetic patients with CKD of any stage, excluding end-stage renal disease (ESRD), were enrolled (2003–2005), if they were not on EPO-stimulating agent and iron therapy. Hepcidin-25 levels were measured by radioimmunoassay. The association of hepcidin-25 at baseline with clinical variables was investigated using linear regression models. All-cause mortality and a composite endpoint of CKD progression (ESRD or doubling of serum creatinine) were analyzed by Cox proportional hazards models. Results: Patients (age 67 yrs, 53% male, GFR 51 ml/min, hemoglobin 131 g/L, EPO 13.5 U/L, hepcidin-25 62.0 ng/ml) were followed for a median time of 4.2 yrs. Forty-nine patients died (19.7%) and forty (16.1%) patients reached the composite endpoint. Elevated hepcidin levels were independently associated with higher ferritin-levels, lower EPO-levels and impaired kidney function (all p<0.05). Hepcidin was related to mortality, along with its interaction with EPO, older age, greater proteinuria and elevated CRP (all p<0.05). Hepcidin was also predictive for progression of CKD, aside from baseline GFR, proteinuria, low albumin- and hemoglobin-levels and a history of CVD (all p<0.05). Conclusions: We found hepcidin-25 to be associated with EPO and impaired kidney function in diabetic CKD. Elevated hepcidin-25 and EPO-levels were independent predictors of mortality, while hepcidin-25 was also predictive for progression of CKD. Both hepcidin-25 and EPO may represent important prognostic factors of clinical outcome and have the potential to further define “high risk” populations in CKD.