The contribution of the intrarenal renin-angiotensin system to the development of hypertension is incompletely understood. Here, we used targeted homologous recombination to generate mice that express angiotensin-converting enzyme (ACE) in the kidney tubules but not in other tissues. Mice homozygous for this genetic modification (ACE 9/9 mice) had low BP levels, impaired ability to concentrate urine, and variable medullary thinning. In accord with the ACE distribution, these mice also had reduced circulating angiotensin II and high plasma renin concentration but maintained normal kidney angiotensin II levels. In response to chronic angiotensin I infusions, ACE 9/9 mice displayed increased kidney angiotensin II, enhanced rate of urinary angiotensin II excretion, and development of hypertension. These findings suggest that intrarenal ACE-derived angiotensin II formation, even in the absence of systemic ACE, increases kidney angiotensin II levels and promotes the development of hypertension.