The present study investigates the relationship between osmotic swelling of vasopressin target cells and their sensitivity to vasopressin (AVP) and dibutyryl cyclic adenosine monophosphate (db cAMP). Conditions which engender osmotic swelling of toad bladder epithelial cells, such as immersing bladders on both surfaces in hypotonic Ringer's fluid or subjecting them to a net mucosal to serosal volume flux, markedly inhibited the effectiveness of db cAMP in raising bladder permeability to water. This inhibitory phenomenon was seen both with serosal and mucosal applications of the nucleotide. Examination of isolated epithelial cells by phase contrast microscopy showed them to behave as osmometers, doubling their volume as the effective osmolality of the incubation medium was halved. AVP was found to increase the total content of cAMP about 3.5 fold both in the swollen and the normal cells, so that the actual concentration of cAMP may have diminished as the cell volume increased. Consistent with this suggestion was the observation that increasing exogenous db cAMP abolished in part the inhibitory effects of hypotonicity. These observations indicate that homeostasis of body fluids in the toad depends in part upon the osmotic regulation of antidiuretic hormone action, and that intracellular cAMP may participate in coupling changes in cell volume to the altered state of responsiveness of the vasopressin target cell.