Sulfated glycoprotein-2 (SGP-2) is a secreted, dimeric, glycosylated protein synthesized by a number of different epithelial cell types. Although its function is not yet understood, SGP-2 has been hypothesized to be involved in such diverse processes as the promotion of cell-cell interactions, spermatogenesis, modulation of the complement system, and programmed cell death. We have now found that the SGP-2 gene is developmentally regulated in the mouse kidney. SGP-2 gene expression is first detected in the condensing nephrogenic mesenchyme and is subsequently down-regulated during the maturation of the glomerular epithelia, proximal tubules, and collecting ducts. SGP-2 continues to be expressed in the mature kidney in distal tubules and in the urothelial lining of the calyx and papilla. We have also examined the expression of the SGP-2 gene in polycystic kidneys of the C57BL/6J-cpk mouse, a model of autosomal recessive polycystic kidney disease in which there is development of epithelial-lined cysts arising primarily from the collecting duct system. Abnormally high levels of SGP-2 mRNA were found in the cyst wall epithelium of polycystic kidneys. The expression of the SGP-2 gene in normal development suggests that it plays a role in differentiating epithelial structures; and the abnormally high levels of SGP-2 gene expression in polycystic kidneys suggests that the cells lining cysts are not fully differentiated. It is possible, therefore, that polycystic kidney disease is caused by a defective developmental process in which there is a delay in terminal differentiation.