Water homeostasis is tightly regulated by the kidneys via the process of urine concentration. During reduced water intake, the antidiuretic hormone arginine vasopressin (AVP) binds to the vasopressin receptor type II (V2R) in the kidney to enhance countercurrent multiplication and medullary osmolality, and increase water reabsorption via aquaporin-2 (AQP2) water channels. The importance of this AVP, V2R, and AQP2 axis is highlighted by low urine osmolality and polyuria in people with various water balance disorders, including nephrogenic diabetes insipidus (NDI). ELF5 and nuclear factor of activated T cells 5 (NFAT5) are two transcription factors proposed to regulate Aqp2 expression, but their role is poorly defined. Here we generated two novel mouse lines with principal cell (PC)-specific deletion of ELF5 or NFAT5 and phenotyped them in respect to renal water handling. ELF5-deficient mice (ELF5 PC-KO ) had a very mild phenotype, with no clear differences in AQP2 abundance, and mild differences in renal water handling and maximal urinary concentrating capacity. In contrast, NFAT5 (NFAT5 PC-KO ) mice had significantly higher water intake and their 24 h urine volume was almost 10fold greater than controls. After challenging with dDAVP or 8 h water restriction, NFAT5 PC-KO mice were unable to concentrate their urine, demonstrating that they suffer from NDI. The abundance of AQP2, other AQPs, and the urea transporter UT-A1 were greatly decreased in NFAT5 PC-KO mice. In conclusion, NFAT5 is a major regulator of not only Aqp2 gene transcription, but also other genes important for water homeostasis and its absence leads to the development of NDI.