Increased cell proliferation and fluid secretion, probably driven by alterations in intracellular calcium homeostasis and cyclic adenosine 3,5-phosphate, play an important role in the development and progression of polycystic kidney disease. Hormone receptors that affect cyclic adenosine monophosphate and are preferentially expressed in affected tissues are logical treatment targets. There is a sound rationale for considering the arginine vasopressin V2 receptor as a target. The arginine vasopressin V2 receptor antagonists OPC-31260 and tolvaptan inhibit the development of polycystic kidney disease in cpk mice and in three animal orthologs to human autosomal recessive polycystic kidney disease (PCK rat), autosomal dominant polycystic kidney disease (Pkd2/WS25 mice), and nephronophthisis (pcy mouse). PCK rats that are homozygous for an arginine vasopressin mutation and lack circulating vasopressin are markedly protected. Administration of V2 receptor agonist 1-deamino-8-D-arginine vasopressin to these animals completely recovers the cystic phenotype. Administration of 1-deamino-8-D-arginine vasopressin to PCK rats with normal arginine vasopressin aggravates the disease. Suppression of arginine vasopressin release by high water intake is protective. V2 receptor antagonists may have additional beneficial effects on hypertension and chronic kidney disease progression. A number of clinical studies in polycystic kidney disease have been performed or are currently active. The results of phase 2 and phase 2-3 clinical trials suggest that tolvaptan is safe and well tolerated in autosomal dominant polycystic kidney disease. A phase 3, placebo-controlled, double-blind study in 18- to 50-yr-old patients with autosomal dominant polycystic kidney disease and preserved renal function but relatively rapid progression, as indicated by a total kidney volume >750 ml, has been initiated and will determine whether tolvaptan is effective in slowing down the progression of this disease.