Wnt signalling regulates several aspects of kidney development such as nephrogenesis, ureteric bud branching and organisation of the collecting duct cells. We addressed the potential involvement of Dickkopf-1 (Dkk1), a secreted Wnt pathway antagonist. Dkk1 is expressed in the developing mouse kidney by pretubular cell aggregates and the nephrons derived from them. Besides the mesenchyme cells, the epithelial ureteric bud and more mature ureteric bud derivatives in the medulla and the papilla tip express the Dkk1 gene. To reveal the potential roles of Dkk1, we generated a floxed allele and used three Cre lines to inactivate Dkk1 function in the developing kidney. Interestingly, Dkk1 deficiency induced by Pax8Cre in the kidneys led in newborn mice to an overgrown papilla that was generated by stimulated proliferation of the collecting duct and loop of Henle cells, implying a role for Dkk1 in the collecting duct and/or loop of Henle development. Since Pax8Cre-induced Dkk1 deficiency reduced marker gene expression, Scnn1b in the collecting duct and Slc12a1 in the loop of Henle, these results together with the extended papilla phenotype are likely reasons for the decreased amount of ions and urine produced by Dkk1-deficient kidneys in the adult. Recombinant Dkk1 protein in cultured cells inhibited Wnt-7b-induced canonical Wnt signalling, which is critical for collecting duct and loop of Henle development. Moreover, Dkk1 deficiency led to an increase in the expression of canonical Wnt signalling of target Lef-1 gene expression in the stromal cells of the developing papilla. Based on the results, we propose that Dkk1 controls the degree of Wnt-7b signalling in the papilla to coordinate kidney organogenesis.