Many members of the transforming growth factor-beta (TGF-beta) superfamily have been shown to be important regulators of metanephric development. In this study, we characterized the effect of TGF-beta2 on metanephric development. Rat and mouse metanephroi cultured in the presence of exogenous TGF-beta2 for up to 15 days were small, and contained rudimentary ureteric branches and few glomeruli. These metanephroi were mostly comprised of mesenchymal cells, with two cell populations (designated Type 1 and Type 2 cells) evident. Type 1 cells were only observed when TGF-beta2 was added from the commencement of culture, they resembled chondroblasts and were Alcian Blue and Col IIB positive. Type 2 cells were observed whenever TGF-beta2 was added to the media, formed a band at the periphery of the explants consisting of 5-10 layers of spindle-shaped cells, and were alpha-smooth muscle actin positive. Molecular and RNA in situ hybridization analysis of metanephroi cultured in the presence of TGF-beta2 for 6 days demonstrated that Type 1 and 2 cells were negative for Pax2, WT1, GDNF and FoxD1. Gene expression profiling demonstrated an upregulation of chondrocyte, myogenic and stromal genes, some of which were identified as markers of Type 1 and Type 2 cells. In addition, TGF-beta2 was capable of maintaining the survival of mouse isolated metanephric mesenchyme (iMM) in the absence of serum or inductive signals from the ureteric epithelium. TGF-beta2 also induced the differentiation of iMM into Type 1 and 2 cells. The presence of chondrocytes and muscle in these cultures is reminiscent of the cell types found in some Wilms tumors. These studies demonstrate that TGF-beta2 is capable of differentiating metanephric mesenchyme away from a renal cell fate.