TGF-beta plays a key role in upregulating matrix production in injury-induced renal fibrosis, but how TGF-beta signaling in distinct compartments of the kidney, such as specific segments of the nephron, affects the response to injury is unknown. In this study, we determined the role of TGF-beta signaling both in development of the renal collecting system and in response to injury by selectively deleting the TGF-beta type II receptor in mice at the initiation of ureteric bud development. These mice developed normally but demonstrated a paradoxic increase in fibrosis associated with enhanced levels of active TGF-beta after unilateral ureteral obstruction. Consistent with this observation, TGF-beta type II receptor deletion in cultured collecting duct cells resulted in excessive integrin alphavbeta6-dependent TGF-beta activation that increased collagen synthesis in co-cultured renal interstitial fibroblasts. These results suggest that inhibiting TGF-beta receptor-mediated function in collecting ducts may exacerbate renal fibrosis by enhancing paracrine TGF-beta signaling between epithelial and interstitial cells.