In this study we have shown that the papilla of the mouse kidney contains a population of Pax2+ cells that are detectable from the early postnatal period through to adulthood. Lineage analysis suggests that some of these Pax2+ cells are derived from the metanephric mesenchyme, a population of progenitor cells that gives rise to the nephrons during kidney organogenesis. Here we describe a method for isolating and culturing the Pax2+ population, and demonstrate that some cells within this population are multipotent stem cells, as they are clonogenic and appear to undergo unlimited self-renewal. Further, under appropriate culture conditions, these stem cells can differentiate to generate renal cell types, such as podocyte- and proximal tubule-like cells, and are also able to generate nonrenal cell types, such as adipocytes and osteocytes. The availability of a kidney-derived multipotent stem cell line with the potential to generate podocytes and proximal tubule cells in culture will expedite progress in understanding the biology of these important renal cell types, and will be a useful tool in toxicological studies and drug discovery.