After the basic shape of the mammalian ureter is established, its epithelia mature and a coat of smooth muscle cells differentiate around nascent urothelia. The ureter actively propels tubular fluid from the renal pelvis to the bladder, and this peristalsis, which starts in the fetal period, requires coordinated smooth muscle contraction. Teashirt-3 (Tshz3) is expressed in smooth muscle cell precursors that form the wall of the forming mammalian ureter. The Teashirt gene family was first identified in Drosophila where Teashirt (Tsh) protein acts as a transcription factor directing embryonic anterior-posterior patterning and leg and eye development. In fly embryonic renal tubules, Tsh is expressed in mesodermally derived stellate cells intercalating between principal cells, and a paralogue, tiptop, is expressed in forming tubules. Teashirt is a component of several gene networks in flies and it is notable that similar networks control mammalian renal tract development. Null mutation of Tshz3 in mice leads to failure of functional muscularization in the top of the ureter and this is followed by congenital hydronephrosis. A signaling pathway can be envisaged, starting with sonic hedgehog secreted by the nascent ureteric urothelium and ending with ureteric smooth muscle cell differentiation, with Tshz3 downstream of bone morphogenetic protein 4 and upstream of myocardin and smooth muscle cell contractile protein synthesis. The phenotype of Tshz3 mutant mice resembles that of human congenital pelviureteric junction obstruction, and we suggest these individuals may have mutations of genes encoding molecules in the differentiation pathway mediated by Tshz3.