Metanephric kidney induction critically depends on mesenchymal–epithelial interactions in the caudal region of the nephric (or Wolffian) duct. Central to this process, GDNF secreted from the metanephric mesenchyme induces ureter budding by activating the Ret receptor expressed in the nephric duct epithelium. A failure to regulate this pathway is believed to be responsible for a large proportion of the developmental anomalies affecting the urogenital system. Here, we show that the nephric duct-specific inactivation of the transcription factor gene Gata3 leads to massive ectopic ureter budding. This results in a spectrum of urogenital malformations including kidney adysplasia, duplex systems, and hydroureter, as well as vas deferens hyperplasia and uterine agenesis. The variability of developmental defects is reminiscent of the congenital anomalies of the kidney and urinary tract (CAKUT) observed in human. We show that Gata3 inactivation causes premature nephric duct cell differentiation and loss of Ret receptor gene expression. These changes ultimately affect nephric duct epithelium homeostasis, leading to ectopic budding of interspersed cells still expressing the Ret receptor. Importantly, the formation of these ectopic buds requires both GDNF/Ret and Fgf signaling activities. We further identify Gata3 as a central mediator of β-catenin function in the nephric duct and demonstrate that the β-catenin/Gata3 pathway prevents premature cell differentiation independently of its role in regulating Ret expression. Together, these results establish a genetic cascade in which Gata3 acts downstream of β-catenin, but upstream of Ret, to prevent ectopic ureter budding and premature cell differentiation in the nephric duct.