Human induced pluripotent stem cell (hiPSC)-derived kidney organoids have prospective applications ranging from basic disease modelling to personalised medicine, however, there remains a requirement to refine the biophysical and biochemical parameters that govern kidney organoid formation. Here we describe the differention and maturation of hiPSC-derived kidney organoids within fully synthetic self-assembling peptide hydrogels (SAPHs) of variable stiffness (storage modulus, G′). The resulting organoids contained complex structures comparable to those differentiated within the animal-derived matrix, Matrigel. Single-cell RNA sequencing (scRNA-seq) was then used to compare organoids matured within SAPHs to those grown within Matrigel or at the air-liquid interface. A total of 13,179 cells were analysed, revealing 14 distinct clusters. Notably, differentiation within a higher G’ SAPH generated podocytes with more mature gene expression profiles. Additionally, maturation within a 3D microenvironment significantly reduced the derivation of off-target cell types, which are a known limitation of current kidney organoid protocols. Finally, we show that these organoids can be used to faithfully model pathogenic processes; by integrating single cell gene expression and epigenome profiling, we identified de novo ACTA2+ve /POSTN+ve cell clusters in kidney organoids treated with TGFbeta, characterised by increased SMAD3-dependent cis chromatin accessibility and the expression of several genes associated with fibroblast activation in patients with Diabetic Kidney Disease. This work demonstrates the utility of synthetic peptide-based hydrogels with a defined stiffness, as a minimally complex microenvironment for the modelling of renal fibrosis.