The Red Kangaroo, Macropus rufus, is a specialist inhabitant of the hot, arid interior of Australia. Physiological adaptations that enable it to survive in this extreme environment are not fully understood, but include modifications of the kidney to optimize water economy and the ability to reabsorb water from digesta. To date, no nasal adaptations have been revealed in M. rufus, even though specializations in this region for thermoregulation and water conservation are common in arid‐zone placental mammals, such as camels. Here, we investigate the nasal osteology and histology of M. rufus and describe two previously unreported features. Computed‐tomographic scans reveal two modifications of the premaxillae in adult M. rufus: a sulcus on the inner margin of lateral walls of the nasal cavity, and a longitudinal recess lying in the floor of the nasal cavity. Histological analysis shows that these are lined with simple respiratory epithelia; no additional glandular structures were evident. The submucosa of the lateral sulcus was highly vascular, suggesting a role in thermoregulation. The lamina propria of the ventral recess was relatively avascular, but contains lymphatic vessels. Presence of the lateral sulcus in the tropical Antilopine Kangaroo, M. antilopinus, and absence of either feature in the more mesic‐adapted grey kangaroos (M. fuliginosus, M. giganteus), lends support to the hypothesis that this premaxillary modification may reflect adaptation of the nasal cavity for thermoregulation. The ventral nasal recess was unique to M. rufus and we suggest that it may play a role in water conservation in this species via reclamation of moisture by the lymphatic system. To our knowledge, this is the first evidence of a nasal mechanism for water reclamation in mammals.