Growth and expansion of the embryonic kidney is driven in large part by continuous branching morphogenesis and nephron induction that occurs in a restricted domain beneath the renal capsule called the nephrogenic zone. Here, new ureteric bud branches and nephron aggregates form surrounded by a layer of cortical stromal cell progenitors. The boundaries and inductive activities of the nephrogenic zone are maintained as the kidney grows. As new ureteric bud branches and nephrogenic aggregates form, older generations of ureteric bud branches, renal vesicles and stromal progenitors are displaced from the nephrogenic zone and undergo further differentiation surrounded by medullary stroma, a different population of stromal cells. Recent studies suggest that cortical and medullary stromal progenitors may be an important source of signals that maintain outer and inner zones of differentiation in the embryonic kidney, and regulate distinct events important for differentiation of nephrons and the collecting duct system.