Fetal lung liquid production is essential for in utero pulmonary development, and the resorption of lung liquid at birth facilitates neonatal transition. Lung liquid also contributes importantly to amniotic fluid volume. Factors that influence lung liquid production/resorption may, therefore, impact fetal pulmonary growth and development as well as amniotic fluid homeostasis. Arginine vasopressin (AVP) inhibits fetal lung liquid production and facilitates lung liquid resorption. In view of studies administering fetal AVP or the V2 receptor agonist, 1 desamino 8‐D AVP (dDAVP) for the regulation of amniotic fluid volume, we sought to determine the impact of AVP V2 receptor stimulation on fetal lung liquid production. Eight near‐term ovine fetuses (130 ± 2 d; term = 145 d) were prepared with hind limb vascular catheters, a bladder catheter, and a tracheal catheter. Each ewe received vascular and amniotic catheters. After 5 days of recovery, the animals were studied for a 2‐hr control period and for 2 hr following intravenous dDAVP injection (1 ng/kg). Lung liquid and urine flow rates and plasma electrolyte and osmolality composition were determined at 30‐min intervals. To confirm fetal lung liquid suppression in response to AVP, two animals received an intravenous injection of AVP (2 ng/kg) 24 hr after the first experiment. dDAVP administration had no effect on lung liquid production (3.4 ± 0.4 ml/kg/h), electrolyte concentrations, or osmolality. Fetal urine electrolyte concentrations and osmolality (154 ± 24–295 ± 22 mOsm/kg H2O) increased in response to dDAVP, whereas urine flow decreased (9.4 ± 2.5–4.2 ± 1.5 ml/kg/h). In the fetuses exposed to AVP, lung liquid production decreased (3.3–1.6 ml/kg/h). As AVP, although not dDAVP, inhibited fetal lung liquid production, these results indicate that AVP effects on lung liquid are likely mediated via the AVP V1 receptor, not the V2 receptor. The use of fetal administration of dDAVP for the regulation of urine production and amniotic fluid volume will not adversely impact lung liquid production. J. Matern.–Fetal Med. 7:177–182, 1998. © 1998 Wiley‐Liss, Inc.