Members of the Wnt family of secreted glycoproteins act as short-range signaling molecules in vertebrate embryogenesis. Previous work has shown that Wnt-4 is required for kidney development. Mice lacking functional Wnt-4 fail to form pretubular cell aggregates. Wnt-4 acts as an autoinducer of the mesenchymal to epithelial transition underlying nephron development. We have identified a member of the gene family encoding secreted frizzled related proteins (sFRP), putative Wnt antagonists, that shows overlapping expression with Wnt-4 in aggregating mesenchyme and simple epithelial bodies during metanephric development. sFRP-2 expression is absent in metanephric mesenchyme of kidneys mutant for Wnt-4 and is coinduced with Wnt-4 in isolated metanephric mesenchyme by cells expressing Wnt-4. The cysteine-rich domain of sFRP-2 binds to Wnt-4 as shown by coimmunoprecipitation experiments. Hence, sFRP-2 is a target of the Wnt-4 signaling pathway in the metanephric kidney and may modulate Wnt-4 signaling. sFRP-2 expression is highly dynamic and specific during other aspects of embryogenesis. sFRP-2 is expressed in subpopulations of ependymal cells in spinal cord and brain, in the developing eye, in limb bud mesenchyme, in the heart, and strongly in skeletogenic condensations of facial bones, suggesting widespread interaction with other members of the Wnt gene family during embryogenesis.