While the genetic control of renal branching morphogenesis has been extensively described, the cellular basis of this process remains obscure. GDNF/RET signaling is required for ureter and kidney development, and cells lacking Ret are excluded from the tips of the branching ureteric bud in chimeric kidneys. Here, we find that this exclusion results from earlier Ret-dependent cell rearrangements in the caudal Wolffian duct, which generate a specialized epithelial domain that later emerges as the tip of the primary ureteric bud. By juxtaposing cells with elevated or reduced RET activity, we find that Wolffian duct cells compete, based on RET signaling levels, to contribute to this domain. At the same time, the caudal Wolffian duct transiently converts from a simple to a pseudostratified epithelium, a process that does not require Ret. Thus, both Ret-dependent cell movements and Ret-independent changes in the Wolffian duct epithelium contribute to ureteric bud formation.