Encapsulating peritoneal sclerosis (EPS) is a rare but severe complication of peritoneal dialysis (PD) characterized by extensive fibrosis of the peritoneum. Changes in peritoneal water transport may precede EPS, but the mechanisms and potential predictive value of that transport defect are unknown. Among 234 patients with ESRD who initiated PD at our institution over a 20-year period, 7 subsequently developed EPS. We evaluated changes in peritoneal transport over time on PD in these 7 patients and in 28 matched controls using 3.86% glucose peritoneal equilibration tests. Compared with long-term PD controls, patients with EPS showed early loss of ultrafiltration capacity and sodium sieving before the onset of overt EPS. Multivariate analysis revealed that loss of sodium sieving was the most powerful predictor of EPS. Compared with long-term PD control and uremic peritoneum, EPS peritoneum showed thicker submesothelial fibrosis, with increased collagen density and a greater amount of thick collagen fibers. Reduced osmotic conductance strongly correlated with the degree of peritoneal fibrosis, but not with vasculopathy. Peritoneal fibrosis was paralleled by an excessive upregulation of vascular endothelial growth factor and endothelial nitric oxide synthase, but the expression of endothelial aquaporin-1 water channels was unaltered. Our findings suggest that an early and disproportionate reduction in osmotic conductance during the course of PD is an independent predictor of EPS. This functional change is linked to specific alterations of the collagen matrix in the peritoneal membrane of patients with EPS, thereby validating the serial three-pore membrane/fiber matrix and distributed models of peritoneal transport.