Gene-targeting studies in mice demonstrate that the renin-angiotensin system is required for the proper development of the renal medulla. In the absence of angiotensin II (ANG II) or the ANG II type 1 (AT1) receptor, mice exhibit poor papillary development and a severe urinary-concentrating defect. These findings imply that the ureteric bud (UB) and its branches are targets for ANG II actions during renal development. However, direct evidence linking ANG II with UB-branching morphogenesis does not exist. Using immunohistochemistry, we demonstrated that UB-derived epithelia express angiotensinogen (Ao) and the AT1 receptor during murine metanephrogenesis. Ao and AT1 receptors are expressed in the UB branches and to a lesser extent in the stromal mesenchyme. AT1 receptor expression in UB-derived epithelia increased from embryo day 12 to day 16 and was observed on both luminal and basolateral membranes. In accord with these findings, cultured murine UB cells express AT1 receptor protein and mRNA. Treatment of UB cells cultured in three-dimensional type I collagen gels with ANG II (10-7 to 10-5 M) elicits a dose-related increase in the number of cells that have primary and secondary branches. These effects of ANG II on UB branching are abrogated by pretreatment with the AT1 receptor antagonist candesartan. These data demonstrate a direct and independent role for ANG II acting via AT1 receptors on UB cell branching in vitro. The presence of Ao in the stroma and AT1 on UB cells supports the notion that cross talk between stroma and epithelial cells is crucial to epithelial branching morphogenesis in the developing kidney.