The goal of this study is to assess whether canagliflozin has a renal and vascular protective effect in reducing the progression of renal impairment relative to placebo in participants with type 2 diabetes mellitus (T2DM), Stage 2 or 3 chronic kidney disease (CKD) and macroalbuminuria, who are receiving standard of care including a maximum tolerated labeled daily dose of an angiotensin-converting enzyme inhibitor (ACEi) or angiotensin receptor blocker (ARB).

This is a randomized (the study medication is assigned by chance), double-blind (neither physician nor participant knows the identity of the assigned treatment), placebo-controlled (an inactive substance that is compared with a medication to test whether the medication has a real effect), parallel-group, multicenter study of the effects of canagliflozin on renal and cardiovascular outcomes in participants with type 2 diabetes mellitus (T2DM) and diabetic nephropathy, who are receiving standard of care including a maximum tolerated daily dose of an angiotensin-converting enzyme inhibitor (ACEi) or angiotensin receptor blocker (ARB).

The study will consist of a pretreatment phase (several weeks), and a double-blind treatment phase (up to approximately 66 months). During the pretreatment phase all participants will also receive diet/exercise counseling for lipid and blood pressure management as well as counseling on renal and cardiovascular (CV) risk factor medication. A post-treatment follow-up contact or visit will take place approximately 30 days after the last dose of study drug or the completion of the study. The total duration of the study is estimated to be about 5 to 5.5 years. Approximately 4,200 participants will be randomized in a 1:1 ratio to canagliflozin or matching placebo. Participants randomized to canagliflozin will receive a dose of 100 mg once daily. The overall safety and tolerability of canagliflozin will be evaluated by collecting information on adverse events, laboratory tests, vital signs (pulse, blood pressure), physical examination, and body weight.

Inclusion Criteria:

• Type 2 diabetes mellitus with a hemoglobin A1c (HbA1c) greater than or equal to (>=) 6.5 percent (%) and less than or equal to (<=) 12.0%, with an estimated glomerular filtration rate (eGFR) of >= 30 milliliter (mL)/minute (min)/1.73meter (m)^2 and less than (<) 90 mL/min/1.73 m^2
• Participants need to be on a stable maximum tolerated labeled daily dose of an angiotensin-converting enzyme inhibitor (ACEi) or angiotensin receptor blocker (ARB) for at least 4 weeks prior to randomization
• Must have a urine albumin to creatinine ratio (UACR) of greater than (>) 300 milligram (mg)/gram (g) and <= 5000 mg/g

Exclusion Criteria:

• History of diabetic ketoacidosis or type 1 diabetes mellitus
• History of hereditary glucose-galactose malabsorption or primary renal glucosuria
• Renal disease that required treatment with immunosuppressive therapy
• Known significant liver disease
• Current or history of New York Heart Association (NYHA) Class IV heart failure
• Blood potassium level >5.5 millimole (mmol)/liter (L) during Screening