Whole-body water balance is predominantly controlled by the kidneys, which have the ability to concentrate or dilute the urine in the face of altered fluid and solute intake. Regulated water excretion is controlled by various hormones and signaling molecules, with the antidiuretic hormone arginine vasopressin (AVP) playing an essential role, predominantly via its modulatory effects on the function of the water channel aquaporin-2 (AQP2). The clinical conditions, central and nephrogenic diabetes insipidus, emphasize the importance of the AVP-AQP2 axis. In this article, we summarize the most important and recent studies on AVP-regulated trafficking of AQP2, with focus on the cellular components mediating (1) AQP2 vesicle targeting to the principal cell apical plasma membrane, (2) docking and fusion of AQP2-containing vesicles, (3) regulated removal of AQP2 from the plasma membrane, and (4) posttranslational modifications of AQP2 that control several of these processes. Insight into the molecular mechanisms responsible for regulated AQP2 trafficking is proving to be fundamental for development of novel therapies for water balance disorders.