OBJECTIVE Metformin is the first pharmacological option for treating type 2 diabetes. However, the use of this drug is not recommended in individuals with impaired kidney function because of the perceived risk of lactic acidosis. We aimed to assess the efficacy and safety of metformin in patients with type 2 diabetic kidney disease (DKD). RESEARCH DESIGN AND METHODS We conducted a retrospective observational cohort study of 10,426 patients with type 2 DKD from two tertiary hospitals. The primary outcomes were all-cause mortality and end-stage renal disease (ESRD) progression. The secondary outcome was metformin-associated lactic acidosis. Taking into account the possibility that patients with less severe disease were prescribed metformin, propensity score matching (PSM) was conducted. RESULTS All-cause mortality and incident ESRD were lower in the metformin group according to the multivariate Cox analysis. Because the two groups had significantly different baseline characteristics, PSM was performed. After matching, metformin usage was still associated with lower all-cause mortality (adjusted hazard ratio [aHR] 0.65; 95% CI 0.57–0.73; P < 0.001) and ESRD progression (aHR 0.67; 95% CI 0.58–0.77; P < 0.001). Only one event of metformin-associated lactic acidosis was recorded. In both the original and PSM groups, metformin usage did not increase the risk of lactic acidosis events from all causes (aHR 0.92; 95% CI 0.668–1.276; P 5 0.629). CONCLUSIONS In the present retrospective study, metformin usage in advanced chronic kidney disease (CKD) patients, especially those with CKD 3B, decreased the risk of all-cause mortality and incident ESRD. Additionally, metformin did not increase the risk of lactic acidosis. However, considering the remaining biases even after PSM, further randomized controlled trials are needed to change real-world practice.