TAZ (transcriptional coactivator with PDZ-binding motif), also called WWTR1 (WW domain containing transcription regulator 1), is a 14-3-3-binding molecule homologous to Yes-associated protein. TAZ acts as a coactivator for several transcription factors as well as a modulator of membrane-associated PDZ domain-containing proteins, but its (patho)physiological roles remain unknown. Here we show that gene inactivation of TAZ in mice resulted in pathological changes in the kidney and lung that resemble the common human diseases polycystic kidney disease and pulmonary emphysema. Taz-null/lacZ knockin mutant homozygotes demonstrated renal cyst formation as early as embryonic day 15.5 with dilatation of Bowman's capsules and proximal tubules, followed by pelvic dilatation and hydronephrosis. After birth, only one-fifth of TAZ-deficient homozygotes grew to adulthood and demonstrated multicystic kidneys with severe urinary concentrating defects and polyuria. Furthermore, adult TAZ-deficient homozygotes exhibited diffuse emphysematous changes in the lung. Thus TAZ is essential for developmental mechanisms involved in kidney and lung organogenesis, whose disturbance may lead to the pathogenesis of common human diseases.