Autosomal dominant polycystic kidney disease (ADPKD) is caused by heterozygous mutations in either PKD1 or PKD2, genes that encode polycystin-1 and polycystin-2, respectively. We show here that tumor necrosis factor-α (TNF-α), an inflammatory cytokine present in the cystic fluid of humans with ADPKD, disrupts the localization of polycystin-2 to the plasma membrane and primary cilia through a scaffold protein, FIP2, which is induced by TNF-α. Treatment of mouse embryonic kidney organ cultures with TNF-α resulted in formation of cysts, and this effect was exacerbated in the Pkd2^+/− kidneys. TNF-α also stimulated cyst formation in vivo in Pkd2^+/− mice. In contrast, treatment of Pkd2^+/− mice with the TNF-α inhibitor etanercept prevented cyst formation. These data reveal a pathway connecting TNF-α signaling, polycystins and cystogenesis, the activation of which may reduce functional polycystin-2 below a critical threshold, precipitating the ADPKD cellular phenotype.