Development of the metanephric kidney in mammals requires complex reciprocal tissue interactions between the ureteric epithelium and the mesenchyme. It is believed that Gdnf, produced in the metanephric mesenchyme, activates Ret signaling in the Wolffian duct to initiate the formation of the metanephros. However, the molecular mechanism for induction of Gdnf in the metanephric mesenchyme is not completely defined. Previous studies demonstrated that during the early stages of kidney development, loss of Osr1, Eya1, Pax2 or Wt1 gene function in the metanephric mesenchyme compromises the formation of the kidney. Moreover, it has been shown that the Hox11-Eya1-Pax2 complex activates the expression of Six2 and Gdnf in the metanephric mesenchyme to drive nephrogenesis. Here, we demonstrate that the orphan nuclear receptor chicken ovalbumin upstream promoter transcription factor II (COUP-TFII, also known as Nr2f2) is required for the specification of the metanephric mesenchyme. Deletion of COUP-TFII at E7.5 results in improper differentiation of the metanephric mesenchyme and absence of essential developmental regulators, such as Eya1, Six2, Pax2 and Gdnf. Importantly, we show that COUP-TFII directly regulates the expression of both Eya1 and Wt1 in the metanephric mesenchyme. Our findings reveal, for the first time, that COUP-TFII plays a central role in the specification of metanephric fate and in the maintenance of metanephric mesenchyme proliferation and survival by acting as a crucial regulator of Eya1 and Wt1 expression.