Mutations in PKHD1 cause autosomal recessive polycystic kidney disease (ARPKD). We produced a mouse model of ARPKD by replacing exons 1-3 of Pkhd1 with a lacZ reporter gene utilizing homologous recombination. This approach yielded heterozygous Pkhd1 (lacZ/+) mice, that expressed beta-galactosidase in tissues where Pkhd1 is normally expressed, and homozygous Pkhd1 (lacZ/lacZ) knockout mice. Heterozygous Pkhd1 (lacZ/+) mice expressed beta-galactosidase in the kidney, liver, and pancreas. Homozygous Pkhd1 (lacZ/lacZ) mice lacked Pkhd1 expression and developed progressive renal cystic disease involving the proximal tubules, collecting ducts, and glomeruli. In the liver, inactivation of Pkhd1 resulted in dilatation of the bile ducts and periportal fibrosis. Dilatation of pancreatic exocrine ducts was uniformly seen in Pkhd1 (lacZ/lacZ ) mice, with pancreatic cysts arising less frequently. The expression of beta-galactosidase, Pkd1, and Pkd2 was reduced in the kidneys of Pkhd1 (lacZ/lacZ ) mice compared with wild-type littermates, but no changes in blood urea nitrogen (BUN) or liver function tests were observed. Collectively, these results indicate that deletion of exons 1-3 leads to loss of Pkhd1 expression and results in kidney cysts, pancreatic cysts, and biliary ductal plate malformations. The Pkhd1 (lacZ/lacZ ) mouse represents a new orthologous animal model for studying the pathogenesis of kidney cysts and biliary dysgenesis that characterize human ARPKD.