Autosomal dominant polycystic kidney disease (ADPKD) is a common disease and an important cause of renal failure. It is characterized by considerable intrafamilial phenotypic variation and focal cyst formation. To elucidate the molecular basis for these observations, we have developed a novel method for isolating renal cystic epithelia from single cysts and have used it to show that individual renal cysts in ADPKD are monoclonal. Loss of heterozygosity was discovered within a subset of cysts for two closely linked polymorphic markers located within the PKD1 gene. Genetic analysis revealed that it was the normal haplotype that was lost. This study provides a molecular explanation for the focal nature of cyst formation and a probable mechanism whereby mutations cause disease. The high rate at which "second hits" must occur to account for the large number of cysts observed suggests that unique structural features of the PKD1 gene may be responsible for its mutability.