Objective: Thrombospondin-2 (TSP2) is a matricellular protein with upregulated tissue expression in diabetes. Recently, circulating TSP2 level was shown as a novel biomarker of liver fibrosis and its progression in patients with type 2 diabetes (T2D). Extracellular matrix remodeling is a key pathogenic event in diabetic kidney disease (DKD). Preclinical studies demonstrated increased renal inflammation and glomerulosclerosis in mice with genetic ablation of TSP2. However, the clinical relevance of circulating TSP2 in DKD remains undefined. Here we investigated prospectively the prognostic importance of serum TSP2 level in the development of renal function decline using a large clinic-based cohort of T2D participants. Methods: Baseline serum TSP2 levels were measured in 5518 Chinese participants from the Hong Kong West Diabetes Registry. The association between serum TSP2 levels and incident renal function decline, defined by a sustained 40% decline in estimated glomerular filtration rate (eGFR), was evaluated using multivariable Cox regression analysis. Results: Over a median follow-up of 7 years, 1167 participants developed eGFR decline, with an incidence of 3.17 per 100 person-years. Elevated circulating TSP2 levels were independently associated with incident eGFR decline (HR 1.46, 95%CI 1.29 - 1.66, p<0.001), together with systolic blood pressure (HR 1.01, p<0.001), eGFR levels (HR 0.98, p<0.001), use of angiotensin converting enzyme inhibitors or angiotensin receptor blockers (HR 1.33, p<0.001), albuminuria status (HR 2.76, p<001) and highly sensitive C-reactive protein levels (HR 1.06, p=0.035) at baseline, in a model also adjusted for age, sex, smoking status, duration of diabetes, body mass index, glycated hemoglobin, lipid levels and presence of cardiovascular disease at baseline. Conclusion: Circulating TSP2 levels were prognostically important for predicting incident renal function decline, which was independent of their baseline eGFR or albuminuria status in T2D patients. There is great potential to employ circulating TSP2 level for early risk stratification in DKD.