Myofibroblast activation is a key event playing a critical role in the progression of chronic renal disease. Emerging evidence suggests that myofibroblasts can derive from tubular epithelial cells by an epithelial to mesenchymal transition (EMT); however, the details regarding the conversion between these two cell types are poorly understood. Here we dissect the key events during the process of EMT induced by transforming growth factor-beta1. Incubation of human tubular epithelial cells with transforming growth factor-beta1 induced de novo expression of alpha-smooth muscle actin, loss of epithelial marker E-cadherin, transformation of myofibroblastic morphology, and production of interstitial matrix. Time-course studies revealed that loss of E-cadherin was an early event that preceded other alterations during EMT. The transformed cells secreted a large amount of matrix metalloproteinase-2 that specifically degraded tubular basement membrane. They also exhibited an enhanced motility and invasive capacity. These alterations in epithelial phenotypes in vitro were essentially recapitulated in a mouse model of renal fibrosis induced by unilateral ureteral obstruction. Hence, these results indicate that tubular epithelial to myofibroblast transition is an orchestrated, highly regulated process involving four key steps including: 1) loss of epithelial cell adhesion, 2) de novo alpha-smooth muscle actin expression and actin reorganization, 3) disruption of tubular basement membrane, and 4) enhanced cell migration and invasion.