The ability of the organism to maintain water balance despite wide variations in water intake depends upon a complex interplay between the factors influencing the circulating level of antidiuretic hormone (ADH) and the factors influencing the renal medullary countercurrent systems. These factors are reviewed and provide the basis for an understanding of the disorders that impair renal concentrating and diluting capacity. Impaired concentrating capacity, which tends to produce polyuria, results either from low levels of circulating ADH or from an impaired responsiveness of the kidney to ADH. Impaired diluting capacity, which tends to produce hyponatremia, may occur under a wide variety of circumstances, including advanced renal failure, increased sodium avidity, the syndrome of inappropriate secretion of ADH, and adrenal insufficiency. Physiologic principles are used to guide the clinician in the differential diagnosis and management of these disorders.