Branched epithelia determine the anatomy of many mammalian organs; understanding how they develop is therefore an important element of understanding organogenesis as a whole. In recent years, much progress has been made in identifying paracrine factors that regulate branching morphogenesis in many organs, but comparatively little attention has been paid to the mechanisms of morphogenesis that translate these signals into anatomical change. Localized cell proliferation is a potentially powerful mechanism for directing the growth of a developing system to produce a specific final morphology. We have examined the pattern of cell proliferation in the ureteric bud system of the embryonic murine metanephric kidneys developing in culture. We detect a zone of high proliferation at the site of the presumptive ureteric bud even before it emerges from the Wolffian duct and later, as ureteric bud morphogenesis continues, proliferation is localized mainly in the very tips of the branching epithelium. Blocking cell cycling using methotrexate inhibits ureteric bud emergence. The proliferative zone is present at ureteric bud tips only when they are undergoing active morphogenesis; if branching is inhibited either by treatment with natural negative regulators (TGF-beta) or with antagonists of natural positive regulators (GDNF, glycosaminoglycans) then proliferation at the tips falls back to levels characteristic of the stalks behind them. Our results suggest that localized proliferation is an important morphogenetic mechanism in kidney development.