Wilms tumour is a paediatric malignancy with features of halted kidney development. Here, we demonstrate that the Iroquois homeobox genes IRX3 and IRX5 are essential for mammalian nephrogenesis and govern the differentiation of Wilms tumour. Knock‐out Irx3 − /Irx5 − mice showed a strongly reduced embryonic nephron formation. In human foetal kidney and Wilms tumour, IRX5 expression was already activated in early proliferative blastema, whereas IRX3 protein levels peaked at tubular differentiation. Accordingly, an orthotopic xenograft mouse model of Wilms tumour showed that IRX3 −/− cells formed bulky renal tumours dominated by immature mesenchyme and active canonical WNT/β‐catenin‐signalling. In contrast, IRX5 −/− cells displayed activation of Hippo and non‐canonical WNT‐signalling and generated small tumours with abundant tubulogenesis. Our findings suggest that promotion of IRX3 signalling or inhibition of IRX5 signalling could be a route towards differentiation therapy for Wilms tumour, in which WNT5A is a candidate molecule for enforced tubular maturation. © 2018 The Authors. The Journal of Pathology published by John Wiley & Sons Ltd on behalf of Pathological Society of Great Britain and Ireland.