PKD2, mutations in which cause autosomal dominant polycystic kidney disease (ADPKD), encodes an integral membrane glycoprotein with similarity to calcium channel subunits. We induced two mutations in the mouse homologue Pkd2 (ref.4): an unstable allele (WS25; hereafter denoted Pkd2WS25) that can undergo homologous-recombination-based somatic rearrangement to form a null allele; and a true null mutation (WS183; hereafter denoted Pkd2-). We examined these mutations to understand the function of polycystin-2, the protein product of Pkd2, and to provide evidence that kidney and liver cyst formation associated with Pkd2 deficiency occurs by a two-hit mechanism. Pkd2-/- mice die in utero between embryonic day (E) 13.5 and parturition. They have structural defects in cardiac septation and cyst formation in maturing nephrons and pancreatic ducts. Pancreatic ductal cysts also occur in adult Pkd2WS25/- mice, suggesting that this clinical manifestation of ADPKD also occurs by a two-hit mechanism. As in human ADPKD, formation of kidney cysts in adult Pkd2WS25/- mice is associated with renal failure and early death (median survival, 65 weeks versus 94 weeks for controls). Adult Pkd2+/- mice have intermediate survival in the absence of cystic disease or renal failure, providing the first indication of a deleterious effect of haploinsufficiency at Pkd2on long-term survival. Our studies advance our understanding of the function of polycystin-2 in development and our mouse models recapitulate the complex human ADPKD phenotype.