Kidney pericytes are progenitors of scar-forming interstitial myofibroblasts that appear after injury. The function of kidney pericytes as microvascular cells and how these cells detach from peritubular capillaries and migrate to the interstitial space, however, are poorly understood. Here, we used an unbiased approach to identify genes in kidney pericytes relevant to detachment and differentiation in response to injury in vivo, with a particular focus on genes regulating proteolytic activity and angiogenesis. Kidney pericytes rapidly activated expression of a disintegrin and metalloprotease with thrombospondin motifs-1 (ADAMTS1) and downregulated its inhibitor, tissue inhibitor of metalloproteinase 3 (TIMP3) in response to injury. Similarly to brain pericytes, kidney pericytes bound to and stabilized capillary tube networks in three-dimensional gels and inhibited metalloproteolytic activity and angiogenic signaling in endothelial cells. In contrast, myofibroblasts did not have these vascular stabilizing functions despite their derivation from kidney pericytes. Pericyte-derived TIMP3 stabilized and ADAMTS1 destabilized the capillary tubular networks. Furthermore, mice deficient in Timp3 had a spontaneous microvascular phenotype in the kidney resulting from overactivated pericytes and were more susceptible to injury-stimulated microvascular rarefaction with an exuberant fibrotic response. Taken together, these data support functions for kidney pericytes in microvascular stability, highlight central roles for regulators of extracellular proteolytic activity in capillary homoeostasis, and identify ADAMTS1 as a marker of activation of kidney pericytes.