WPF Development Tools

Microsoft provides two development tools for WPF applications. One is Visual Studio, made for developers and the other is Expression Blend made for designers. While Visual Studio is good in code and XAML editing, it has a rare support for all the graphical stuff like gradients, template editing, animation, etc. This is the point where Expression Blend comes in. Blend covers the graphical part very well but it has (still) rare support for code and XAML editing.
So the conclusion is that you will need both of them.

Microsoft Visual Studio 2010

Visual Studio is the tool for developers to develop WPF applications. It includes a graphical designer for WPF since version 2008. If you're using Visual Studio 2005 you can install an add-on that enables you to develop WPF applications.
Microsoft provides a free Express Edition of Visual Studio that also includes the WPF designer. You can download it from the following URL
Download Microsoft Visual C# 2010 - Express Edition

Microsoft Expression Blend 3 + Sketch Flow

Expression Blend is the tool for designers. It's part of the Expression Studio, a new tool suite from Microsoft especially created for user experience designers. Blend covers all the missing features of the Visual Studio designer like styling, templating, animations, 3D graphics, resources and gradients.
In the latest Version it also includes a powerful prototyping tool called SketchFlow. Expression Blend can open solution files created by visual studio.
Download Microsoft Expression Blend 3

Other useful tools

• WPF Inspector
• Snoop (Inspect the Visual Tree of running WPF applications)
• Mole (Data Visualizer for Visual Studio
• XAML Power Toys
• WPF Performance Suite