During renal fibrogenesis, tubular epithelial-mesenchymal transition is closely associated with peritubular inflammation; however, it is not clear whether these two processes are connected. We previously identified the inhibitor of differentiation-1 (Id1), a dominant negative antagonist of basic helix-loop-helix transcription factors, as a major trigger of tubular cell dedifferentiation after injury. Id1 was induced selectively in degenerated proximal tubule and collecting duct epithelia after injury and was present in both the cytoplasm and nucleus, suggesting shuttling between these two compartments. Interestingly, the upregulation of Id1 was associated with peritubular inflammation in mouse and human nephropathies. In vitro, Id1 potentiated NF-κB signaling and augmented RANTES expression in kidney epithelial cells, which led to an enhanced recruitment of inflammatory cells. Id1 also induced Snail1 expression and triggered tubular epithelial dedifferentiation. In vivo, genetic ablation of Id1 in mice reduced peritubular inflammation and decreased tubular expression of RANTES following ureteral obstruction. Mice lacking Id1 were also protected against myofibroblast activation and matrix expression, leading to a reduced total collagen deposition in obstructive nephropathy. Thus, these results indicate that Id1 shuttles between nucleus and cytoplasm, and promotes peritubular inflammation and tubular epithelial dedifferentiation, suggesting that these two events are intrinsically coupled during renal fibrogenesis.