The mammalian kidney is composed of thousands of individual epithelial tubules known as nephrons. Deficits in nephron number are associated with myriad diseases ranging from complete organ failure to congenital hypertension. A balance between differentiation and maintenance of a mesenchymal progenitor cell population determines the final number of nephrons. How this balance is struck is poorly understood. Previous studies have suggested that Wnt9b/β-catenin signaling induced differentiation (mesenchymal-to-epithelial transition) in a subset of the progenitors but needed to be repressed in the remaining progenitors to keep them in the undifferentiated state. Here, we report that Wnt9b/β-catenin signaling is active in the progenitors and is required for their renewal/proliferation. Using a combination of approaches, we have revealed a mechanism through which cells receiving the same Wnt9b/β-catenin signal can respond in distinct ways (proliferate versus differentiate) depending on the cellular environment in which the signal is received. Interpretation of the signal is dependent, at least in part, on the activity of the transcription factor Six2. Six2-positive cells that receive the Wnt9b signal are maintained as progenitors whereas cells with reduced levels of Six2 are induced to differentiate by Wnt9b. Using this simple mechanism, the kidney is able to balance progenitor cell expansion and differentiation insuring proper nephron endowment. These findings provide novel insights into the molecular mechanisms that regulate progenitor cell differentiation during normal and pathological conditions.