Transdifferentiation is the poorly understood phenomenon whereby a terminally differentiated cell acquires a completely new identity. Here, we describe a rare example of a naturally occurring transdifferentiation in zebrafish in which kidney distal tubule epithelial cells are converted into an endocrine gland known as the Corpuscles of Stannius (CS). We find that this process requires Notch signalling and is associated with the cytoplasmic sequestration of the Hnf1b transcription factor, a master-regulator of renal tubule fate. A deficiency in the Irx3b transcription factor results in ectopic transdifferentiation of distal tubule cells to a CS identity but in a Notch-dependent fashion. Using live-cell imaging we show that CS cells undergo apical constriction en masse and are then extruded from the tubule to form a distinct organ. This system provides a valuable new model to understand the molecular and morphological basis of transdifferentiation and will ad vance efforts to exploit this rare phenomenon therapeutically.