Diabetic kidney disease (DKD) is the major cause of end-stage renal disease worldwide. PANoptosis, a newly identified form of inflammatory cell death, is closely associated with DKD development, though its mechanism in DKD is still uncertain. Our previous study found elevated serum levels of free Nε-(carboxymethyl)-lysine (CML), a significant advanced glycation end product, in patients with renal dysfunction. However, its diagnostic value and role in DKD and PANoptosis remain unclear. Here, we found that serum levels of free CML were elevated in DKD patients, having the potential for early diagnosis. In vitro, free CML stimulation of podocytes (MPC5 cells) led to significant oxidative stress and cell injury, marked by increased reactive oxygen species (ROS), lactate dehydrogenase release, IL-1β secretion, and apoptosis level. In vivo, free CML injection in db/m and db/db mice worsened renal function and podocyte injury. PANoptosis caused this injury, and related inhibitors alleviated cell injury from free CML. Mechanistically, free CML increased NLRP3 via the NF-κB pathway, promoting RIPK1-PANoptosome formation and triggering podocyte PANoptosis, as confirmed by NF-κB inhibitors (PDTC) and Nlrp3 knockdown. Molecular docking and rescue experiments with the RAGE antagonist (FPS-ZM1) confirmed that free CML induced PANoptosis through the ROS/NF-κB pathway via RAGE. FPS-ZM1 reduced CML-induced PANoptosis and slowed DKD progression in db/db mice. These findings indicate that free CML activates the RAGE/NF-κB/NLRP3 axis, promoting podocyte PANoptosis and DKD progression, offering potential diagnostic and treatment targets.