The intercalated cell of the collecting tubule exists in a spectrum of types. The alpha form secretes acid by an apical H+-ATPase and a basolateral CI:HCO3 exchanger, which is an alternatively spliced form of the red cell band 3 (kAE1), and the beta form secretes HCO3 by having these transporters on the reverse membranes. In a clonal cell line of the beta form, we found that seeding density causes conversion of beta cells to the alpha form. A new protein, termed hensin, was deposited in the extracellular matrix (ECM) of high-density cells, which, on purification, reversed the polarity of the transporters. Hensin also induced the expression of the microvillar protein villin and caused the appearance of the apical terminal web proteins, cytokeratin 19 and actin; all of which led to the development of an exuberant microvillar structure. In addition, hensin caused the beta cells to assume a columnar shape. All of these studies show that the conversion of polarity in the intercalated cell, at least in vitro, represents terminal differentiation and that hensin is the first protein in a new pathway that mediates this process. Hensin, DMBT1, CRP-ductin, and ebnerin are alternately spliced products from a single gene located in human chromosome 10q25-26, a region often deleted in several cancers, especially malignant gliomas. Hensin is expressed in many epithelial cell types and it is possible that it plays a similarly important role in the differentiation of these epithelia as well.