Congenital hydronephrosis is a serious disease occurring among infants and children. Besides the intrinsic genetic factors, in utero exposure to a xenobiotic, 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD), has been suggested to induce hydronephrosis in rodents owing to anatomical obstruction in the ureter. Here, we report that hydronephrosis induced in mouse pups exposed lactationally to TCDD is not associated with anatomical obstruction, but with abnormal alterations in the subepithelial mesenchyma of the ureter. In the kidneys of these pups, the expressions of a battery of inflammatory cytokines including monocyte chemoattractant protein (MCP)-1, tumor necrosis factor alpha (TNFalpha) and interleukin (IL)-1beta were up-regulated as early as postnatal day (PND) 7. The amounts of cyclooxygenase (COX)-2 mRNA and protein as well as prostaglandin E2 (PGE(2)) were conspicuously up-regulated in an arylhydrocarbon-receptor-dependent manner in the TCDD-induced hydronephrotic kidney, with a subsequent down-regulation of the gene expressions of Na+ and K+ transporters, NKCC2 and ROMK. Daily administration of a COX-2 selective inhibitor to newborns until PND 7 completely abrogated the TCDD-induced PGE(2) synthesis and gene expressions of inflammatory cytokines and electrolyte transporters, and eventually prevented the onset of hydronephrosis. These findings suggest an essential role of COX-2 in mediating the TCDD action of inducing hydronephrosis through the functional impairment rather than the anatomical blockade of the ureter.