Polycystin-2 functions as a cation-permeable transient receptor potential ion channel in kidney epithelial cells and when mutated results in human autosomal dominant polycystic kidney disease. For further exploration of the in vivo functions of Polycystin-2, this study examined its expression and function during zebrafish embryogenesis. pkd2 mRNA is ubiquitously expressed, and its presence in the larval kidney could be confirmed by reverse transcription-PCR on isolated pronephroi. Immunostaining with anti-zebrafish Polycystin-2 antibody revealed protein expression in motile kidney epithelial cell cilia and intracellular cell membranes. Intracellular localization was segment specific; in the proximal nephron segment, Polycystin-2 was localized to basolateral cell membranes, whereas in the caudal pronephric segment, Polycystin-2 was concentrated in subapical cytoplasmic vesicles. Polycystin-2 also was expressed in muscle cells and in a variety of sensory cells that are associated with mechanotransduction, including cells of the ear, the lateral line organ, and the olfactory placodes. Disruption of Polycystin-2 mRNA expression resulted in pronephric kidney cysts, body axis curvature, organ laterality defects, and hydrocephalus-defects that could be rescued by expression of a human PKD2 mRNA. In-frame deletions in the first extracellular loop and C-terminal phosphofurin acidic cluster sorting protein-1 (PACS-1) binding sites in the cytoplasmic tail caused Polycystin-2 mislocalization to the apical cell surface. Unlike zebrafish intraflagellar transport protein (IFT) mutants, cyst formation was not associated with cilia defects and instead correlated with reduced kidney fluid output, expansion of caudal duct apical cell membranes, and occlusion of the caudal pronephric nephron segment.