Vasopressin increased adenyl cyclase activity in homogenates of both inner and outer renal medulla of the rat. It also increased the concentration of cyclic 3',5'-adenosine monophosphate (AMP) in slices of both inner and outer medulla but not in renal cortex. In the inner medulla, a concentration of prostaglandin E(1) (PGE(1)), which was ineffective by itself significantly reduced the stimulation of adenyl cyclase activity and cyclic AMP concentration induced by vasopressin. These results are consistent with the hypothesis that PGE(1) can compete with vasopressin for adenyl cyclase-binding sites. However, the findings in the outer medulla suggest the situation is more complex. Although 10(-8) M PGE(1) had no effect by itself and inhibited the vasopressin-induced elevation of cyclic AMP, larger amounts of PGE(1) increased both adenyl cyclase activity and cyclic AMP levels. The maximum effect on the latter parameter was at least 6 times as great as that of maximum amounts of vasopressin.