The molecular etiology of many urinary tract abnormalities in children remains unknown, but a number of genes with a key role in urogenital development have now been identified. PAX2, one such gene, encodes a transcription factor which is critically required for epithelial differentiation within the urogenital tract. Recent studies suggest that PAX2 mutations lead to urological abnormalities and renal failure, while overexpression of PAX2 in the kidneys of mice causes multifocal microcystic tubular dilatation. In humans persistent PAX2 expression has been identified in multicystic dysplastic kidneys. In this review, recent research on the developmental gene, PAX2, and its involvement in normal and abnormal kidney development is summarized. In addition, an overview of the phenotypes associated with either loss-of-function PAX2 mutations or PAX2 overexpression is presented. A brief summary of factors that are known to regulate PAX2 and genes that may be regulated by PAX2 protein is also included.