Hoxa11 and Hoxd11 are functionally redundant during kidney development. Mice with homozygous null mutation of either gene have normal kidneys, but double mutants have rudimentary, or in extreme cases, absent kidneys. We have examined the mechanism for renal growth failure in this mouse model and find defects in ureteric bud branching morphogenesis. The ureteric buds are either unbranched or have an atypical pattern characterized by lack of terminal branches in the midventral renal cortex. The mutant embryos show that Hoxa11 and Hoxd11 control development of a dorsoventral renal axis. By immunohistochemical analysis, Hoxa11 expression is restricted to the early metanephric mesenchyme, which induces ureteric bud formation and branching. It is not found in the ureteric bud. This suggests that the branching defect had been caused by failure of mesenchyme to epithelium signaling. In situ hybridizations with Wnt7b, a marker of the metanephric kidney, show that the branching defect was not simply the result of homeotic transformation of metanephros to mesonephros. Absent Bf2 and Gdnf expression in the midventral mesenchyme, findings that could by themselves account for branching defects, shows that Hoxa11 and Hoxd11 are necessary for normal gene expression in the ventral mesenchyme. Attenuation of normal gene expression along with the absence of a detectable proliferative or apoptotic change in the mutants show that one function of Hoxa11 and Hoxd11 in the developing renal mesenchyme is to regulate differentiation necessary for mesenchymal-epithelial reciprocal inductive interactions.