Hydrocortisone acetate is known to produce polycystic kidney disease when administered to susceptible animals in the perinatal period. To assess whether sodium and water transport mechanisms are involved in cyst pathogenesis, we administered lithium, an inhibitor of such transport in the distal nephron, and ethacrynic acid, an inhibitor of sodium transport in the Loop of Henle, to hydrocortisone acetate treated newborn rats. Hydrocortisone acetate alone resulted in significant polycystic kidney disease with the development of uremia, hypokalemia, and shortened life span. Co-administration of lithium and hydrocortisone acetate increased the severity of cystic tubular change and further compromised renal function. Ethacrynic acid reduced the degree of cyst formation induced by the combination of lithium chloride and hydrocortisone acetate but otherwise had no effect. We conclude that fluid and electrolyte disturbance plays a significant role in cyst formation, but we are unable to ascribe that effect to a single ion. We also conclude that the antinatriuretic effect of glucocorticoids is not the principal factor in glucocorticoid induced polycystic kidney disease.