The serine/threonine phosphatase calcineurin is an important signaling molecule involved in kidney development and function. One potential target of calcineurin action is the water channel aquaporin 2 (AQP2). In this study, we examined the effect of loss of calcineurin Aα (CnAα) on AQP2 function in vivo. CnAα null mice were found to have defective post-natal urine-concentrating ability and an impaired urine-concentrating response to vasopressin. Expression of AQP2 is normal but, paradoxically, vasopressin-mediated phosphorylation of the channel is decreased compared with wild-type littermates and there is no accumulation of AQP2 in the apical membrane. Calcineurin protein and activity was found in innermedullary collecting duct vesicles, and loss of calcineurin expression and activity was associated with a loss of AQP2 in the vesicle fraction. As such, the lack of vasopressin-mediated phosphorylation of AQP2 might be the result of a defect in normal trafficking of AQP2 to apical-targeted vesicles. Likewise, treatment of wild-type mice with cyclosporin A to inhibit calcineurin produces a similarly impaired urine-concentrating response to vasopressin and alterations in AQP2 phosphorylation and trafficking. These experiments demonstrate that, CnAα is required for normal intracellular trafficking of AQP2 and loss of calcineurin protein or activity disrupts AQP2 function.