Dysfunction of the ureter often leads to urine flow impairment from the kidney to the bladder, causing dilation of the ureter and/or renal pelvis. Six1 is a crucial regulator of renal development: mutations in human SIX1 cause branchio-oto-renal (BOR) syndrome and Six1–/– mice exhibit renal agenesis, although the ureter is present. It remains unclear whether Six1 plays a role in regulating ureter morphogenesis. We demonstrate here that Six1 is differentially expressed during ureter morphogenesis. It was expressed in undifferentiated smooth muscle (SM) progenitors, but was downregulated in differentiating SM cells (SMCs) and had disappeared by E18.5. In Six1–/– mice, the ureteral mesenchymal precursors failed to condense and differentiate into normal SMCs and showed increased cell death, indicating that Six1 is required for the maintenance and normal differentiation of SM progenitors. A delay in SMC differentiation was observed in Six1–/– ureters. A lack of Six1 in the ureter led to hydroureter and hydronephrosis without anatomical obstruction when kidney formation was rescued in Six1–/– embryos by specifically expressing Six1 in the metanephric mesenchyme, but not the ureter, under control of the Eya1 promoter. We show that Six1 and Tbx18 genetically interact to synergistically regulate SMC development and ureter function and that their gene products form a complex in cultured cells and in the developing ureter. Two missense mutations in SIX1 from BOR patients reduced or abolished SIX1-TBX18 complex formation. These findings uncover an essential role for Six1 in establishing a functionally normal ureter and provide new insights into the molecular basis of urinary tract malformations in BOR patients.