The development of a complex tissue from a few simple precursor cells requires the precise activation and repression of tissue-specific genes that determine cell lineages, tissue patterning, and cellular proliferation. In the kidney, a number of recently identified genes are critical for normal development. Among these, the Pax-2 gene encodes a transcription factor that is expressed in the ureter bud, in the induced kidney mesenchyme, and in the progenitor cells of the glomerular and tubular epithelium. Although the differentiation of the renal epithelium requires Pax-2 function, failure to suppress the gene in mature epithelium is detrimental to normal renal function. Recent, data suggest that the Wilms' tumor-suppressor gene WT1 can down-regulate Pax-2 expression, consistent with high levels of Pax-2 in Wilms' tumors. Additional studies suggest that reactivation of this developmental regulator can contribute to a variety of other renal diseases.