In the embryonic kidney, progenitors in the metanephric mesenchyme differentiate into specialized renal epithelia in a defined sequence characterized by the formation of cellular aggregates, conversion into polarized epithelia and segmentation along a proximal-distal axis. This sequence is reiterated throughout renal development to generate nephrons. Here, we identify global transcriptional programs associated with epithelial differentiation utilizing an organ culture model of rat metanephric mesenchymal differentiation, which recapitulates the hallmarks of epithelialization in vivo in a synchronized rather than reiterative fashion. We observe activation of multiple putative targets of beta-catenin/TCF/Lef-dependent transcription coinciding with epithelial differentiation. We show in cultured explants that isolated activation of beta-catenin signaling in epithelial progenitors induces, in a TCF/Lef-dependent manner, a subset of the transcripts associated with epithelialization, including Pax8, cyclin D1 (Ccnd1) and Emx2. This is associated with anti-apoptotic and proliferative effects in epithelial progenitors, whereas cells with impaired TCF/Lef-dependent transcription are progressively depleted from the epithelial lineage. In vivo, TCF/Lef-responsive genes comprise a conserved transcriptional program in differentiating renal epithelial progenitors and beta-catenin-containing transcriptional complexes directly bind to their promoter regions. Thus, beta-catenin/TCF/Lef-mediated transcriptional events control a subset of the differentiation-associated transcriptional program and thereby participate in maintenance, expansion and stage progression of the epithelial lineage.