Polycystin-1 is a protein mutated in the majority of cases of autosomal dominant polycystic kidney disease (ADPKD), but its role in the molecular pathway of tubulogenesis and cystogenesis is not understood. To define the role of polycystin-1 during dynamic changes in formation of intercellular contacts and cell polarity accompanying epithelial morphogenesis, we have utilized a 3D MDCK in vitro model of tubulogenesis and cystogenesis. Here we demonstrate that polycystin-1 is a novel component of desmosomal junctions of epithelial cells. A striking downregulation of polycystin-1 mRNA was detected in cysts as compared to tubules, leading to altered protein expression and localization. While polycystin-1 is localized to basolateral membranes of MDCK tubules, it is only detected in cytoplasmic pools in cystic cells. Furthermore, the expression of polycystin-1 is modulated during distinct stages of HGF-induced tubulogenesis from MDCK cysts. Thus, polycystin-1 is not detected in intercellular contacts at early steps of tubulogenesis, but assumes its basolateral localization at the time of cell polarization and lumen formation. An important role of polycystin-1 is further demonstrated using the pancreatic ductal epithelial cell line SU.86.86 which undergoes in vitro differentiation resulting in the formation of domes. Dome formation is thought to parallel tubular differentiation and morphogenesis in vivo. Our data reveal significant upregulation of polycystin-1 mRNA and protein levels in domes. Collectively, our results demonstrate a critical importance of controlled level of polycystin-1 expression for proper tubular differentiation and maturation. We suggest that the loss of polycystin-1 from its basolateral location in tubular epithelium may alter critical pathways controlling normal tubulogenesis leading to cystic transformation.