The mature renal medulla, the inner part of the kidney, consists of the medullary collecting ducts, loops of Henle, vasa recta and the interstitium. The unique spatial arrangement of these components is essential for the regulation of urine concentration and other specialized kidney functions. Thus, the proper and timely assembly of medulla constituents is a crucial morphogenetic event leading to the formation of a functioning metanephric kidney. Mechanisms that direct renal medulla formation are poorly understood. This review describes the current understanding of the key molecular and cellular mechanisms underlying morphological aspects of medulla formation. Given that hypoplasia of the renal medulla is a common manifestation of congenital obstructive nephropathy and other types of congenital anomalies of the kidney and urinary tract (CAKUT), better understanding of how disruptions in medulla formation are linked to CAKUT will enable improved diagnosis, treatment and prevention of CAKUT and their associated morbidity.