During kidney morphogenesis, the formation of nephrons begins when mesenchymal nephron progenitor cells aggregate and transform into epithelial vesicles that elongate and assume an S-shape. Cells in different regions of the S-shaped body subsequently differentiate into the morphologically and functionally distinct segments of the mature nephron. Here, we have used an allelic series of mutations to determine the role of the secreted signaling molecule FGF8 in nephrogenesis. In the absence of FGF8 signaling, nephron formation is initiated, but the nascent nephrons do not express Wnt4 or Lim1, and nephrogenesis does not progress to the S-shaped body stage. Furthermore, the nephron progenitor cells that reside in the peripheral zone, the outermost region of the developing kidney, are progressively lost. When FGF8 signaling is severely reduced rather than eliminated, mesenchymal cells differentiate into S-shaped bodies. However, the cells within these structures that normally differentiate into the tubular segments of the mature nephron undergo apoptosis, resulting in the formation of kidneys with severely truncated nephrons consisting of renal corpuscles connected to collecting ducts by an abnormally short tubular segment. Thus, unlike other FGF family members, which regulate growth and branching morphogenesis of the collecting duct system, Fgf8 encodes a factor essential for gene regulation and cell survival at distinct steps in nephrogenesis.