Congenital ureter anomalies, including hydroureter, affect up to 1% of the newborn children. Despite the prevalence of these developmental abnormalities in young children, the underlying molecular causes are only poorly understood. Here, we show that the high mobility group domain transcription factor Sox9 plays an important role in ureter development in the mouse. Transient Sox9 expression was detected in the undifferentiated ureteric mesenchyme and inactivation of Sox9 in this domain resulted in strong proximal hydroureter formation due to functional obstruction. Loss of Sox9 did not affect condensation, proliferation and apoptosis of the undifferentiated mesenchyme, but perturbed cyto-differentiation into smooth muscle cells (SMCs). Expression of genes encoding extracellular matrix (ECM) components was strongly reduced, suggesting that deficiency in ECM composition and/or signaling may underlie the observed defects. Prolonged expression of Sox9 in the ureteric mesenchyme led to increased deposition of ECM components and SMC dispersal. Furthermore, Sox9 genetically interacts with the T-box transcription factor 18 gene (Tbx18) during ureter development at two levels--as a downstream mediator of Tbx18 function and in a converging pathway. Together, our results argue that obstructive uropathies in campomelic dysplasia patients that are heterozygous for mutations in and around SOX9 arise from a primary requirement of Sox9 in the development of the ureteric mesenchyme.