Birt-Hogg-Dubé (BHD) syndrome is a tumor-suppressor gene disorder characterized by skin tumors, cystic lung disease and renal cell carcinoma. Very little is known about the molecular pathogenesis of BHD. Clinical similarities between BHD and tuberous sclerosis complex (TSC) suggest that the BHD and TSC proteins may function within a common pathway. The TSC proteins inhibit the activity of the mammalian target of rapamycin complex 1 (TORC1), and in Schizosaccharomyces pombe, Bhd and Tsc1/Tsc2 have opposing roles in the regulation of amino-acid homeostasis. We report here that in mammalian cells, downregulation of BHD reduces the phosphorylation of ribosomal protein S6, an indicator of TORC1 activity. To determine whether folliculin, the product of the BHD gene, regulates mammalian target of rapamycin activity in vivo, we generated a mouse with targeted inactivation of the Bhd gene. The mice developed spontaneous oncocytic cysts and tumors composed of cells that resemble the renal cell carcinomas in BHD patients. The cysts and tumors had low levels of phospho-S6. Taken together, these data indicate that folliculin regulates the activity of TORC1, and suggest a new paradigm in which both inappropriately high and inappropriately low levels of TORC1 activity can be associated with renal tumorigenesis.