To investigate the differentiation capability of kidney stem cells (KSCs) into renal tubular epithelial cells (RTECs). KSCs isolated from the renal papilla of 4-week-old SD rats were co-cultured with hypoxia-exposed RTEC in induced medium (containing activin A, BMP-7, and retinoic acid) and renal epithelial cell growth medium (REGM) alternately. The KSCs cultured in MSC medium served as the control. The KSC differentiation rates in both groups were determined using flow cytometry, immunofluorescence assay and qRT-PCR. Flow cytometry showed a CK-18 positive rate of 6.5Percnt; in the control KSC group and of 44.2% in the induced group. Immunofluorescence assay detected the positivity for mature epithelial cell markers CK-18, E-cadherin, and ZO-1 in the induced cells. The results of qRT-PCR showed significantly increased expression of E-cadherin and AQP-1 mRNAs in the induced cells compared with the control cells (P<0.01). Rat KSCs can be induced to differentiate into RTECs in vitro.