A ntidiuretic hormone (arginine vasopressin [AVP]) induces fusion of vesicles that contain the water channel aquaporin-2 (AQP2) with the plasma membrane of renal collecting duct principal cells. This "AQP2 shuttle" increases the osmotic water permeability (Pf) of the cells, facilitating water reabsorption from the collecting duct (1). The AQP2 shuttle is initiated upon binding of AVP to vasopressin-2 receptors (V2R) and triggered by the consequent cAMP elevation and protein kinase A (PKA) activation. It is the PKA phosphorylation of AQP2 that elicits redistribution of AQP2-bearing vesicles. Pivotal to this redistribution is the compartmentalization of PKA by A kinase anchoring proteins (AKAP) (2). Phosphodiesterases (PDE), which are the sole means of degrading cAMP, are poised to regulate PKA signaling (3-6). The PDE4 family has attracted great interest because of its link to stroke (7), schizophrenia (8), and the therapeutic potential of selective inhibitors for treating inflammatory diseases (9-12). The four subfamilies (PDE4A through D) are encoded by separate genes, generating approximately 20 isoforms (9,11) that can interact with scaffolding proteins, including AKAP and -arrestin (12-16), positioning them for a role in compartmentalized cAMP/PKA signaling.Here we show that compartmentalization of cAMP/PKA signaling by PDE4 is involved in the regulation of the AQP2 shuttle and the Pf. This is of particular pertinence because PDE4 hyperactivity causes nephrogenic diabetes insipidus in a mouse model (17).