The transcription factor hepatocyte nuclear factor-1β (HNF-1β) is essential for normal kidney development and function. Inactivation of HNF-1β in mouse kidney tubules leads to early-onset cyst formation and postnatal lethality. Here,we used Pkhd1/Cre mice to delete HNF-1β specifically in renal collecting ducts (CDs). CD-specific HNF-1β mutant mice survived long term and developed slowly progressive cystic kidney disease, renal fibrosis, and hydronephrosis. Compared with wild-type littermates, HNF-1β mutant mice exhibited polyuria and polydipsia. Before the development of significant renal structural abnormalities, mutant mice exhibited low urine osmolality at baseline and afterwater restriction and administration of desmopressin. However,mutant andwildtype mice had similar plasma vasopressin and solute excretion levels. HNF-1β mutant kidneys showed increased expression of aquaporin-2mRNAbut mislocalizedexpression of aquaporin-2protein in the cytoplasmofCDcells. Mutant kidneys also had decreased expression of the UT-A urea transporter and collectrin, which is involved in apical membrane vesicle trafficking. Treatment of HNF-1β mutant mIMCD3 cells with hypertonic NaCl inhibited the induction of osmoregulated genes, including Nr1h4, which encodes the transcription factor FXR that is required formaximal urinary concentration. Chromatin immunoprecipitation andsequencingexperiments revealed HNF-1β binding to the Nr1h4 promoter in wild-type kidneys, and immunoblot analysis revealed downregulated expression of FXR in HNF-1β mutant kidneys. These findings reveal a novel role of HNF-1β in osmoregulation and identify multiple mechanisms, whereby mutations ofHNF-1β produce defects in urinary concentration.