Nephron morphogenesis is a complex process that generates blood-filtration units (glomeruli) connected to extremely long and patterned tubular structures. Hepatocyte nuclear factor 1β (HNF1β) is a divergent homeobox transcription factor that is expressed in kidney from the first steps of nephrogenesis. Mutations in HNF1B (OMIM #137920) are frequently found in patients with developmental renal pathologies, the mechanisms of which have not been completely elucidated. Here we show that inactivation of Hnf1b in the murine metanephric mesenchyme leads to a drastic tubular defect characterized by the absence of proximal, distal and Henle's loop segments. Nephrons were eventually characterized by glomeruli, with a dilated urinary space, directly connected to collecting ducts via a primitive and short tubule. In the absence of HNF1β early nephron precursors gave rise to deformed S-shaped bodies characterized by the absence of the typical bulge of epithelial cells at the bend between the mid and lower segments. The lack of this bulge eventually led to the absence of proximal tubules and Henle's loops. The expression of several genes, including Irx1, Osr2 and Pou3f3, was downregulated in the S-shaped bodies. We also observed decreased expression of Dll1 and the consequent defective activation of Notch in the prospective tubular compartment of comma- and S-shaped bodies. Our results reveal a novel hierarchical relationship between HNF1β and key genes involved in renal development. In addition, these studies define a novel structural and functional component of S-shaped bodies at the origin of tubule formation.