Autosomal dominant polycystic kidney disease, a leading cause of end-stage renal disease in adults, is characterized by progressive focal cyst formation in the kidney. Embryonic lethality of Pkd1-targeted mice limits the use of these mice. Here we developed a floxed allele of Pkd1 exons 2-6. Global deletion mutants developed polyhydramnios, hydrops fetalis, polycystic kidney and pancreatic disease. Somatic Pkd1 inactivation in the kidney was achieved by crossing Pkd1(flox) mice with transgenic mice expressing Cre controlled by a gamma-glutamyltranspeptidase promoter. These mutants developed cysts in both proximal and distal nephron segments and survived for about 4 weeks. Somatic loss of heterozygosity was shown in a reporter mouse strain to cause cystogenesis. Some cysts in young mice are positive for multiple tubular markers and a mesenchymal marker, suggesting a delay in tubular epithelial differentiation. A higher cell proliferation rate was observed in distal nephron segments probably accounting for the faster growth rate of distal cysts. Although we observed an overall increase in apoptosis in cystic kidneys, there was no difference between proximal or distal nephron segments. We also found increased cyclic AMP, aquaporin 2 and vasopressin type 2 receptor mRNA levels, and apical membrane translocation of aquaporin 2 in cystic kidneys, all of which may contribute to the differential cyst growth rate observed. The accelerated polycystic kidney phenotype of these mice provides an excellent model for studying molecular pathways of cystogenesis and to test therapeutic strategies.