The Rho GTPase Cdc42 regulates key signaling pathways required for multiple cell functions, including maintenance of shape, polarity, proliferation, migration, differentiation and morphogenesis. Although previous studies have shown that Cdc42 is required for proper epithelial development and maintenance, its exact molecular function in kidney development is not well understood. In this study, we define the specific role of Cdc42 during murine kidney epithelial tubulogenesis by deleting it selectively at the initiation of ureteric bud or metanephric mesenchyme development. Deletion in either lineage results in abnormal tubulogenesis, with profound defects in polarity, lumen formation and the actin cytoskeleton. Ultimately, these defects lead to renal failure. Additionally, in vitro analysis of Cdc42-null collecting duct cells shows that Cdc42 controls these processes by regulating the polarity Par complex (Par3-Par6-aPKC-Cdc42) and the cytoskeletal proteins N-Wasp and ezrin. Thus, we conclude that the principal role of Cdc42 in ureteric bud and metanephric mesenchyme development is to regulate epithelial cell polarity and the actin cytoskeleton.