Sodium glucose co-transporter 2 (SGLT2) inhibitors reduce the risk of heart and kidney failure in patients with type 2 diabetes, possibly due to diuretic effects. Previous non-placebo-controlled studies with SGLT2 inhibitors observed changes in volume markers in healthy individuals and in patients with type 2 diabetes with preserved kidney function. It is unclear whether patients with type 2 diabetes and signs of kidney damage show similar changes. Therefore, a post hoc analysis was performed on two randomized controlled trials (n = 69), assessing effects of dapagliflozin 10 mg/day when added to renin-angiotensin system inhibition in patients with type 2 diabetes and urinary albumin-to-creatinine ratio ≥30 mg/g. Blood and 24-h urine was collected at the start and the end of treatment periods lasting six and 12 weeks. Effects of dapagliflozin compared to placebo on various markers of volume status were determined. Fractional lithium excretion, a marker of proximal tubular sodium reabsorption, was assessed in 33 patients. Dapagliflozin increased urinary glucose excretion by 217.2 mmol/24 h (95% confidence interval (CI): from 155.7 to 278.7, p < 0.01) and urinary osmolality by 60.4 mOsmol/kg (from 30.0 to 90.9, p < 0.01), compared to placebo. Fractional lithium excretion increased by 19.6% (from 6.7 to 34.2; p < 0.01), suggesting inhibition of sodium reabsorption in the proximal tubule. Renin and copeptin increased by 46.9% (from 21.6 to 77.4, p < 0.01) and 33.0% (from 23.9 to 42.7, p < 0.01), respectively. Free water clearance (FWC) decreased by -885.3 mL/24 h (from -1156.2 to -614.3, p < 0.01). These changes in markers of volume status suggest that dapagliflozin exerts both osmotic and natriuretic diuretic effects in patients with type 2 diabetes and kidney damage, as reflected by increased urinary osmolality and fractional lithium excretion. As a result, compensating mechanisms are activated to retain sodium and water.