Congenital anomalies frequently occur in organs that undergo tubulogenesis. Hypospadias is a urethral tube defect defined by mislocalized, oversized, or multiple openings of the penile urethra. Deletion of Fgfr2 or its ligand Fgf10 results in severe hypospadias in mice, in which the entire urethral plate is open along the ventral side of the penis. In the genital tubercle, the embryonic precursor of the penis and clitoris, Fgfr2 is expressed in two epithelial populations: the endodermally derived urethral epithelium and the ectodermally derived surface epithelium. Here, we investigate the tissue-specific roles of Fgfr2 in external genital development by generating conditional deletions of Fgfr2 in each of these cell types. Conditional deletion of Fgfr2 results in two distinct phenotypes: endodermal Fgfr2 deletion causes mild hypospadias and inhibits maturation of a complex urethral epithelium, whereas loss of ectodermal Fgfr2 results in severe hypospadias and absence of the ventral prepuce. Although these cell type-specific mutants exhibit distinctive genital anomalies, cellular analysis reveals that Fgfr2 regulates epithelial maturation and cell cycle progression in the urethral endoderm and in the surface ectoderm. The unexpected finding that ectodermal deletion of Fgfr2 results in the most severe hypospadias highlights a major role for Fgfr2 in the developing genital surface epithelium, where epithelial maturation is required for maintenance of a closed urethral tube. These results demonstrate that urethral tubulogenesis, prepuce morphogenesis, and sexually dimorphic patterning of the lower urethra are controlled by discrete regions of Fgfr2 activity.