Water reabsorption in the kidney represents a critical physiological event in the maintenance of body water homeostasis. This highly regulated process relies largely on vasopressin (VP) action and on the VP-sensitive water channel (AQP2) that is expressed in principal cells of the kidney collecting duct. Defects in the VP signaling pathway and/or in AQP2 cell surface expression can lead to an inappropriate reduction in renal water reabsorption and the development of nephrogenic diabetes insipidus, a disease characterized by polyuria and polydipsia. This review focuses on the major regulatory steps that are involved in AQP2 trafficking and function. Specifically, we begin with a discussion on VP-receptor-independent mechanisms of AQP2 trafficking, with special emphasis on the nitric oxide-cyclic guanosine monophosphate signaling pathway, followed by a review of the mechanisms that govern AQP2 endocytosis and exocytosis. We then discuss emerging data illustrating roles played by the actin cytoskeleton on AQP2 trafficking, and lastly we consider elements that affect AQP2 protein expression in cells. Recent advances in each topic are summarized and are presented in the context of their potential to serve as a basis for the development of novel therapies that may ultimately improve life quality of nephrogenic diabetes insipidus patients.