Differentiation is the process by which tissues/organs take on their final, physiologically functional form. This process is mediated in part by the silencing of embryonic genes and the activation of terminal, differentiation gene products. Mammalian kidney development is initiated when the Wolffian duct branches and invades the overlying metanephric mesenchyme. The newly formed epithelial bud, known as the ureteric bud, will continue to branch ultimately differentiating into the collecting duct system and ureter. Here, we show that Hoxb7-Cre mediated removal of beta-catenin from the mouse Wolffian duct epithelium leads to the premature expression of gene products normally associated with the differentiated kidney collecting duct system including the water channel protein, Aquaporin-3 and the tight junction protein isoform, ZO-1 alpha+. Mutant cells fail to maintain expression of some genes associated with embryonic development, including several mediators of branching morphogenesis, which subsequently leads to kidney aplasia or hypoplasia. Reciprocally, expression of a stabilized form of beta-catenin appears to block differentiation of the collecting ducts. All of these defects occur in the absence of any effects on the adherens junctions. These data indicate a role for beta-catenin in maintaining cells of the Wolffian ducts and the duct derived ureteric bud/collecting duct system in an undifferentiated or precursor state.