In autosomal dominant polycystic kidney disease (ADPKD), the genetic defect results in the slow growth of a multitude of epithelial cysts within the renal parenchyma. Cysts originate within the glomeruli and all tubular structures, and their growth is the result of proliferation of incompletely differentiated epithelial cells and the accumulation of fluid within the cysts. The majority of cysts disconnect from tubular structures as they grow but still accumulate fluid within the lumen. The fluid accumulation is the result of secretion of fluid driven by active transepithelial Cl- secretion. Proliferation of the cells and fluid secretion are activated by agonists of the cAMP signaling pathway. The transport mechanisms involved include the cystic fibrosis transmembrane conductance regulator (CFTR) present in the apical membrane of the cystic cells and a bumetanide-sensitive transporter located in the basolateral membrane. A lipid factor, called cyst activating factor, has been found in the cystic fluid. Cyst activating factor stimulates cAMP production, proliferation, and fluid secretion by cultured renal epithelial cells and also is a chemotactic agent. Cysts also appear in the intrahepatic biliary tree in ADPKD. Normal ductal cells secrete Cl- and HCO3-. The cystic ductal cell also secretes Cl-, but HCO3- secretion is diminished, probably as the result of a lower population of Cl-/HCO3- exchangers in the apical membrane as compared with the normal cells. Some segments of the normal renal tubule are also capable of utilizing CFTR to secrete Cl-, particularly the inner medullary collecting duct. The ability of Madin-Darby canine kidney cells and normal human kidney cortex cells to form cysts in culture and to secrete fluid and the functional similarities between these incompletely differentiated, proliferative cells and developing cells in the intestinal crypt and in the fetal lung have led us to suggest that Cl- and fluid secretion may be a common property of at least some renal epithelial cells in an intermediate stage of development. The genetic defect in ADPKD may not directly affect membrane transport mechanisms but rather may arrest the development of certain renal epithelial cells in an incompletely differentiated, proliferative stage.