The WT1 tumor suppressor gene, implicated in hereditofamilial and sporadic Wilms' tumor, is required for normal renal development and is up-regulated during the mesenchymal-epithelial transition. NIH3T3 fibroblasts overexpressing WT1 were less proliferative, larger in size and more firmly attached to tissue culture plastic, suggesting an alteration of their state of differentiation. These cells were studied in vivo by subcutaneous injection into nude mice. The resulting tumors exhibited epithelioid histopathology and formed desmosome-like structures. Molecular analyses of these WT1 expressing fibroblasts grown in culture and in nude mice revealed significant alterations in the expression of many kidney epithelial markers. These studies indicate that WT1 expression can initiate features of a program of epithelial differentiation consistent with a prominent role for WT1 in the mesenchymal epithelial transition that occurs during renal development. Through this work we identified a number of novel target genes for the WT1 transcription factor, including uvomorulin, integrin alpha8 and perlecan, and suggest that WTI may activate the IGF-II gene, also implicated in the development of Wilms' tumor.