The control of water balance in multicellular organisms depends on absorptive and secretory processes across epithelia. This study concerns the effects of osmolality on the function of the Malpighian tubules (MTs), a major component of the insect excretory system. Previous work has shown that the biogenic amine tyramine increases transepithelial chloride conductance and urine secretion in Drosophila MTs. This study demonstrates that the response of MTs to tyramine, as measured by the depolarization of the transepithelial potential (TEP), is modulated by the osmolality of the surrounding medium. An increase in osmolality caused decreased tyramine sensitivity, whereas a decrease in osmolality resulted in increased tyramine sensitivity; changes in osmolality of +/-20% resulted in a nearly 10-fold modulation of the response to 10 nM tyramine. The activity of another diuretic agent, leucokinin, was similarly sensitive to osmolality, suggesting that the modulation occurs downstream of the tyramine receptor. In response to continuous tyramine signaling, as likely occurs in vivo, the TEP oscillates, and an increase in osmolality lengthened the period of these oscillations. Increased osmolality also caused a decrease in the rate of urine production; this decrease was attenuated by the tyraminergic antagonist yohimbine. A model is proposed in which this modulation of tyramine signaling enhances the conservation of body water during dehydration stress. The modulation of ligand signaling is a novel effect of osmolality and may be a widespread mechanism through which epithelia respond to changes in their environment.