A high level of polycystin-1 expression is detected in kidneys of all patients with autosomal dominant polycystic kidney disease (ADPKD). Mice that overexpress polycystin-1 also develop renal cysts. Whether overexpression of polycystin-1 is necessary for cyst formation is still unclear. Here, we report the generation of a targeted mouse mutant with a null mutation in Pkd1 and its phenotypic characterization in comparison with the del34 mutants that carry a ‘truncation mutation’ in Pkd1. We show that null homozygotes develop the same, but more aggressive, renal and pancreatic cystic disease as del34/del34. Moreover, we report that both homozygous mutants develop polyhydramnios, hydrops fetalis, spina bifida occulta and osteochondrodysplasia. Heterozygotes also develop adult-onset pancreatic disease. We show further that del34 homozygotes continue to produce mutant polycystin-1, thereby providing a possible explanation for increased immunoreactive polycystin-1 in ADPKD cyst epithelia in the context of the two-hit model. Our data demonstrate for the first time that loss of polycystin-1 leads to cyst formation and defective skeletogenesis, and indicate that polycystin-1 is critical in both epithelium and chondrocyte development.