While GDNF signaling through the Ret receptor is critical for kidney development, its specific role in branching morphogenesis of the epithelial ureteric bud (UB) is unclear. Ret expression defines a population of UB "tip cells" distinct from cells of the tubular "trunks," but how these cells contribute to UB growth is unknown. We have used time-lapse mosaic analysis to investigate normal cell fates within the growing UB and the developmental potential of cells lacking Ret. We found that normal tip cells are bipotential, contributing to both tips and trunks. Cells lacking Ret are specifically excluded from the tips, although they contribute to the trunks, revealing that the tips form and expand by GDNF-driven cell proliferation. Surprisingly, the mutant cells assumed an asymmetric distribution in the UB trunks, suggesting a model of branching in which the epithelium of the tip and the adjacent trunk is remodeled to form new branches.