The conversion of mesenchyme to epithelium during the embryonic development of the mammalian kidney requires reciprocal inductive interactions between the ureter and the responding metanephric mesenchyme. The Pax-2 gene is activated in the mesenchyme in response to induction and is subsequently down-regulated in more differentiated cells derived from the mesenchyme. Pax-2 belongs to a family of genes, at least three of which encode morphogenetic regulatory transcription factors. In order to determine the role of Pax-2 during kidney development, we have generated a loss-of-function phenotype using antisense oligonucleotides in mouse kidney organ cultures. These oligonucleotides can specifically inhibit Pax-2 protein accumulation in kidney mesenchyme cells, where the intracellular concentrations are maximal. The kidney organ cultures were stained with uvomurulin and laminin antibodies as markers for epithelium formation. With significantly reduced Pax-2 protein levels, kidney mesenchyme cells fail to aggregate and do not undergo the sequential morphological changes characteristic of epithelial cell formation. The data demonstrate that Pax-2 function is required for the earliest phase of mesenchyme-to-epithelium conversion.