The effects of osmolality on prostaglandin E2 (PGE2) biosynthetic capacity and the interaction between endogenous PGE2 synthesis and vasopressin (AVP)-dependent cyclic AMP generation were examined in papillary collecting ducts (PCD) microdissected from collagenase-digested rat kidneys. Increasing medium osmolality with NaCl:urea (1:2 molar ratio) progressively increased PGE2 synthesis in PCD up to 1,500 mOsm. Addition of NaCl:urea or NaCl alone were equally effective in stimulating PGE2 biosynthetic capacity in PCD. In contrast, addition of urea alone had a much smaller stimulatory effect on PGE2 synthesis. Inhibition of endogenous PGE2 synthesis with naproxen (10(-5)M) suppressed AVP-dependent cAMP formation in PCD when incubated in 300 mOsm medium but had no effect when incubated in 1,500 mOsm medium. Addition of 2.5 X 10(-5) M PGE2 also suppressed AVP-dependent cAMP formation in PCD only when incubated in 300 mOsm medium. The present study suggests that the PCD is a site of active PGE2 synthesis that is modulated by osmolality. Our results do not support the concept that endogenous PGE2 antagonizes vasopressin action via inhibition of AVP-dependent cAMP formation.