During kidney development and in response to inductive signals, the metanephric mesenchyme aggregates, becomes polarized, and generates much of the epithelia of the nephron. As such, the metanephric mesenchyme is a renal progenitor cell population that must be replenished as epithelial derivatives are continuously generated. The molecular mechanisms that maintain the undifferentiated state of the metanephric mesenchymal precursor cells have not yet been identified. In this paper, we report that functional inactivation of the homeobox gene Six2 results in premature and ectopic differentiation of mesenchymal cells into epithelia and depletion of the progenitor cell population within the metanephric mesenchyme. Failure to renew the mesenchymal cells results in severe renal hypoplasia. Gain of Six2 function in cortical metanephric mesenchymal cells was sufficient to prevent their epithelial differentiation in an organ culture assay. We propose that in the developing kidney, Six2 activity is required for maintaining the mesenchymal progenitor population in an undifferentiated state by opposing the inductive signals emanating from the ureteric bud.