Epithelial polarization modulates gene expression. The transcription factor zonula occludens 1 (ZO-1)-associated nucleic acid binding protein (ZONAB) can shuttle between tight junctions and nuclei, promoting cell proliferation and expression of cyclin D1 and proliferating cell nuclear antigen (PCNA), but whether it also represses epithelial differentiation is unknown. Here, during mouse kidney ontogeny and polarization of proximal tubular cells (OK cells), ZONAB and PCNA levels decreased in parallel and inversely correlated with increasing apical differentiation, reflected by expression of megalin/cubilin, maturation of the brush border, and extension of the primary cilium. Conversely, ZONAB reexpression and loss of apical differentiation markers provided a signature for renal clear cell carcinoma. In confluent OK cells, ZONAB overexpression increased proliferation and PCNA while repressing megalin/cubilin expression and impairing differentiation of the brush border and primary cilium. Reporter and chromatin immunoprecipitation assays demonstrated that megalin and cubilin are ZONAB target genes. Sparsely plated OK cells formed small islands composed of distinct populations: Cells on the periphery, which lacked external tight junctions, strongly expressed nuclear ZONAB, proliferated, and failed to differentiate; central cells, surrounded by continuous junctions, lost nuclear ZONAB, stopped proliferating, and engaged in apical differentiation. Taken together, these data suggest that ZONAB is an important component of the mechanisms that sense epithelial density and participates in the complex transcriptional networks that regulate the switch between proliferation and differentiation.