TGF-β plays a key role in upregulating matrix production in injury-induced renal fibrosis, but how TGF-β signaling in distinct compartments of the kidney, such as specific segments of the nephron, affects the response to injury is unknown. In this study, we determined the role of TGF-β signaling both in development of the renal collecting system and in response to injury by selectively deleting the TGF-β type II receptor in mice at the initiation of ureteric bud development. These mice developed normally but demonstrated a paradoxic increase in fibrosis associated with enhanced levels of active TGF-β after unilateral ureteral obstruction. Consistent with this observation, TGF-β type II receptor deletion in cultured collecting duct cells resulted in excessive integrin αvβ6-dependent TGF-β activation that increased collagen synthesis in co-cultured renal interstitial fibroblasts. These results suggest that inhibiting TGF-β receptor-mediated function in collecting ducts may exacerbate renal fibrosis by enhancing paracrine TGF-β signaling between epithelial and interstitial cells.