The renal medulla produces concentrated urine through the generation of an osmotic gradient that progressively increases from the cortico-medullary boundary to the inner medullary tip. In the outer medulla, the osmolality gradient arises principally from vigorous active transport of NaCl, without accompanying water, from the thick ascending limbs of short- and long-looped nephrons. In the inner medulla, the source of the osmotic gradient has not been identified. Recently, there have been important advances in our understanding of key components of the urine-concentrating mechanism, including (a) better understanding of the regulation of water, urea, and sodium transport proteins; (b) better resolution of the anatomical relationships in the medulla; and (c) improvements in mathematical modeling of the urine-concentrating mechanism. Continued experimental investigation of signaling pathways regulating transepithelial transport, both in normal animals and in knockout mice, and incorporation of the resulting information into mathematical simulations may help to more fully elucidate the mechanism for concentrating urine in the inner medulla.