Wnt-4 signaling plays a critical role in kidney development and is associated with the epithelial conversion of the metanephric mesenchyme. Furthermore, secreted Frizzled-related proteins (sFRPs) that can bind Wnts are normally expressed in the developing metanephros, and function in other systems as modulators of Wnt signaling. sfrp-1 is distributed throughout the medullary and cortical stroma in the metanephros, but is absent from condensed mesenchyme and primitive tubular epithelia of the developing nephron where wnt-4 is highly expressed. In contrast, sfrp-2 is expressed in primitive tubules. To determine their role in kidney development, recombinant sFRP-1, sFRP-2 or combinations of both were applied to cultures of 13-dpc rat metanephroi. Both tubule formation and bud branching were markedly inhibited by sFRP-1, but concurrent sFRP-2 treatment restored some tubular differentiation and bud branching. sFRP-2 itself showed no effect on cultures of metanephroi. In cultures of isolated, induced rat metanephric mesenchymes, sFRP-1 blocked events associated with epithelial conversion (tubulogenesis and expression of lim-1, sfrp-2 and E-cadherin); however, it had no demonstrable effect on early events (compaction of mesenchyme and expression of wt1). As shown herein, sFRP-1 binds Wnt-4 with considerable avidity and inhibits the DNA-binding activity of TCF, an effector of Wnt signaling, while sFRP-2 had no effect on TCF activation. These observations suggest that sFRP-1 and sFRP-2 compete locally to regulate Wnt signaling during renal organogenesis. The antagonistic effect of sFRP-1 may be important either in preventing inappropriate development within differentiated areas of the medulla or in maintaining a population of cortical blastemal cells to facilitate further renal expansion. On the other hand, sFRP-2 might promote tubule formation by permitting Wnt-4 signaling in the presence of sFRP-1.