Obstructive nephropathy is a major cause of renal failure, particularly in infants and children. Cellular and molecular mechanisms responsible for the progression of the tubular atrophy and interstitial fibrosis—processes that lead to nephron loss—have been elucidated in the past 5 years. Following urinary tract obstruction and tubular dilatation, a cascade of events results in upregulation of the intrarenal renin–angiotensin system, tubular apoptosis and macrophage infiltration of the interstitium. This is followed by accumulation of interstitial fibroblasts through proliferation of resident fibroblasts and epithelial–mesenchymal transformation of renal tubular cells. Under the influence of cytokines, chemokines and other signaling molecules produced by tubular and interstitial cells, fibroblasts undergo transformation to myofibroblasts that induce expansion of the extracellular matrix. The cellular interactions that regulate development of interstitial inflammation, tubular apoptosis and interstitial fibrosis are complex. Changes in renal gene expression and protein production afford many potential biomarkers of disease progression and targets for therapeutic manipulation. These include signaling molecules and receptors involved in macrophage recruitment and proliferation, tubular death signals and survival factors, and modulators of epithelial–mesenchymal transformation. Targeted gene deletion and various forms of gene therapy have been used in experimental obstructive nephropathy, mostly rodent models of unilateral ureteral obstruction or cell culture techniques. Further refinement of these models is needed to develop a matrix of biomarkers with clinical predictive value, as well as molecular therapies that will prevent or reverse the renal structural and functional consequences of obstructive nephropathy.