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Heterozygous mutations in the HNF1beta/vHNF1/TCF2 gene cause maturity-onset diabetes of the young (MODY5), associated with severe renal disease and abnormal genital tract. Here, we characterize two fetuses, a 27-week male and a 31.5-week female, carrying novel mutations in exons 2 and 7 of HNF1beta, respectively. Although these mutations were predicted to have different functional consequences, both fetuses displayed highly similar phenotypes. They presented one of the most severe phenotypes described in HNF1beta carriers: bilateral enlarged polycystic kidneys, severe pancreas hypoplasia and abnormal genital tract. Consistent with this, we detected high levels of HNF1beta transcripts in 8-week human embryos in the mesonephros and metanephric kidney and in the epithelium of pancreas. Renal histology and immunohistochemistry analyses of mutant fetuses revealed cysts derived from all nephron segments with multilayered epithelia and dysplastic regions, accompanied by a marked increase in the expression of beta-catenin and E-cadherin. A significant proportion of cysts still expressed the cystic renal disease proteins, polycystin-1, polycystin-2, fibrocystin and uromodulin, implying that cyst formation may result from a deregulation of cell-cell adhesion and/or the Wnt/beta-catenin signaling pathway. Both fetuses exhibited a severe pancreatic hypoplasia with underdeveloped and disorganized acini, together with an absence of ventral pancreatic-derived tissue. beta-catenin and E-cadherin were strongly downregulated in the exocrine and endocrine compartments, and the islets lacked the transporter essential for glucose-sensing GLUT2, indicating a beta-cell maturation defect. This study provides evidence of differential gene-dosage requirements for HNF1beta in normal human kidney and pancreas differentiation and increases our understanding of the etiology of MODY5 disorder.