Studies of a TAZ knockout mouse reveal a novel function of the transcriptional regulator TAZ, that is, as a binding partner of the F-box protein beta-Trcp. TAZ-/- mice develop polycystic kidney disease (PKD) and emphysema. The calcium-permeable cation channel protein polycystin 2 (PC2) is overexpressed in kidneys of TAZ-/- mice as a result of decreased degradation via an SCF(beta-Trcp) E3 ubiquitin ligase pathway. Replacements of serines in a phosphodegron motif in TAZ prevent beta-Trcp binding and PC2 degradation. Coexpression of a cytoplasmic fragment of polycystin 1 blocks the PC2-TAZ interaction and prevents TAZ-mediated degradation of PC2. Depletion of TAZ in zebrafish also results in a cystic kidney accompanied by overexpression of PC2. These results establish a common role of TAZ across vertebrate species in a protein degradation pathway regulated by phosphorylation and implicate deficiencies in this pathway in the development of PKD.