1. Experiments in vivo and in vitro were performed in the rat to define the role of somatostatin in modulating the hydro-osmotic action of arginine vasopressin. 2. Somatostatin had a biphasic effect on basal collecting duct diffusional water permeability with 10(-9) mol/l somatostatin producing a 14% reduction in permeability, whereas concentrations of 10(-6) and 10(-5) mol/l significantly increased basal water permeability by 13% and 22%, respectively. Somatostatin (10(-9) mol/l) also inhibited the increase in water permeability produced by arginine vasopressin, although this inhibitory effect was reduced by a 10-fold increase in arginine vasopressin concentration (5 ng/ml). 3. In the anaesthetized water-diuretic rat, low dose somatostatin (60 micrograms/h) increased free water clearance by 23% (P < 0.01), whereas increasing the somatostatin concentration (600 micrograms/h) produced a transitory 40% fall in free water clearance (P < 0.01). As in the experiment in vitro, somatostatin inhibited the action of arginine vasopressin, although a very high concentration of arginine vasopressin (250 ng/h) partly overcame this effect. 4. Glomerular filtration rate and renal electrolyte excretion (sodium, potassium, calcium, magnesium) were not altered by somatostatin, although renal inorganic phosphate excretion was increased. The papillary solute gradient was unaltered by somatostatin. 5. These results suggest that circulating somatostatin may have a physiological role in modulating distal nephron water transport with a low concentration directly inhibiting and a high concentration facilitating water transport. There is also evidence of competitive binding between somatostatin and arginine vasopressin which antagonizes the hydro-osmotic action of arginine vasopressin.