The human kidney is composed of roughly 1.2-million renal tubules that must maintain their tubular structure to function properly. In autosomal dominant polycystic kidney disease (ADPKD) cysts develop from renal tubules and enlarge independently, in a process that ultimately causes renal failure in 50% of affected individuals. Mutations in either PKD1 or PKD2 are associated with ADPKD but the function of these genes is unknown. PKD1 is thought to encode a membrane protein, polycystin-1, involved in cell-cell or cell-matrix interactions, whereas the PKD2 gene product, polycystin-2, is thought to be a channel protein. Here we show that polycystin-1 and -2 interact to produce new calcium-permeable non-selective cation currents. Neither polycystin-1 nor -2 alone is capable of producing currents. Moreover, disease-associated mutant forms of either polycystin protein that are incapable of heterodimerization do not result in new channel activity. We also show that polycystin-2 is localized in the cell in the absence of polycystin-1, but is translocated to the plasma membrane in its presence. Thus, polycystin-1 and -2 co-assemble at the plasma membrane to produce a new channel and to regulate renal tubular morphology and function.