Atrial natriuretic factor results in diuresis in animals and humans, perhaps because atrial natriuretic factor increases renal blood flow. The possibility that this diuresis is due to direct inhibition of renal tubular epithelial water transport was examined in rabbit collecting tubules perfused in vitro. Atriopeptin III inhibition of the hydraulic conductivity response to the hormone arginine vasopressin but not to either 3'5'-cyclic adenosine monophosphate or forskolin was found. These results suggest that atriopeptin III acts proximal to cyclic adenosine monophosphate formation to directly affect vasopressin-stimulated water transport in the mammalian nephron. They also suggest a potential role for inhibition by atrial natriuretic factor of the renal response to arginine vasopressin as a contributor to a diuretic state.