Fibrosis underlies the loss of renal function in patients with chronic kidney disease (CKD) and in kidney transplant recipients with chronic allograft nephropathy (CAN). Here, we studied the effect of an intronic SNP in SHROOM3, which has previously been linked to CKD, on the development of CAN in a prospective cohort of renal allograft recipients. The presence of the rs17319721 allele at the SHROOM3 locus in the donor correlated with increased SHROOM3 expression in the allograft. In vitro, we determined that the sequence containing the risk allele at rs17319721 is a transcription factor 7–like 2–dependent (TCF7L2-dependent) enhancer element that functions to increase SHROOM3 transcription. In renal tubular cells, TGF-β1 administration upregulated SHROOM3 expression in a β-catenin/TCF7L2–mediated manner, while SHROOM3 in turn facilitated canonical TGF-β1 signaling and increased α1 collagen (COL1A1) expression. Inducible and tubular cell–specific knockdown of Shroom3 markedly abrogated interstitial fibrosis in mice with unilateral ureteric obstruction. Moreover, SHROOM3 expression in allografts at 3 months after transplant and the presence of the SHROOM3 risk allele in the donor correlated with increased allograft fibrosis and with reduced estimated glomerular filtration rate at 12 months after transplant. Our findings suggest that rs17319721 functions as a cis-acting expression quantitative trait locus of SHROOM3 that facilitates TGF-β1 signaling and contributes to allograft injury.