The mammalian kidney is organized into a cortex where primary filtration occurs, and a medullary region composed of elongated tubular epithelia where urine is concentrated. We show that the cortico-medullary axis of kidney organization and function is regulated by Wnt7b signaling. The future collecting duct network specifically expresses Wnt7b. In the absence of Wnt7b, cortical epithelial development is normal but the medullary zone fails to form and urine fails to be concentrated normally. The analysis of cell division planes in the collecting duct epithelium of the emerging medullary zone indicates a bias along the longitudinal axis of the epithelium. By contrast, in Wnt7b mutants, cell division planes in this population are biased along the radial axis, suggesting that Wnt7b-mediated regulation of the cell cleavage plane contributes to the establishment of a cortico-medullary axis. The removal of beta-catenin from the underlying Wnt-responsive interstitium phenocopies the medullary deficiency of Wnt7b mutants, suggesting a paracrine role for Wnt7b action through the canonical Wnt pathway. Wnt7b signaling is also essential for the coordinated growth of the loop of Henle, a medullary extension of the nephron that elongates in parallel to the collecting duct epithelium. These findings demonstrate that Wnt7b is a key regulator of the tissue architecture that establishes a functional physiologically active mammalian kidney.