The complexity of hyponatremia as a clinical problem is likely caused by the opposite scenarios that accompany this electrolyte disorder regarding pathophysiology (depletional versus dilutional hyponatremia, high versus low vasopressin levels) and therapy (rapid correction to treat cerebral edema versus slow correction to prevent osmotic demyelination, fluid restriction versus fluid resuscitation). For a balanced differentiation between these opposites, an understanding of the pathophysiology of hyponatremia is required. Therefore, in this review an attempt is made to translate the physiology of water balance regulation to strategies that improve the clinical management of hyponatremia. A physiology-based approach to the patient with hyponatremia is presented, first addressing the possibility of acute hyponatremia, and then asking if and if so why vasopressin is secreted non-osmotically. Additional diagnostic recommendations are not to rely too heavily of the assessment of the extracellular fluid volume, to regard the syndrome of inappropriate antidiuresis as a diagnosis of exclusion, and to rationally investigate the pathophysiology of hyponatremia rather than to rely on isolated laboratory values with arbitrary cutoff values. The features of the major hyponatremic disorders are discussed, including diuretic-induced hyponatremia, adrenal and pituitary insufficiency, the syndrome of inappropriate antidiuresis, cerebral salt wasting, and exercise-associated hyponatremia. The treatment of hyponatremia is reviewed from simple saline solutions to the recently introduced vasopressin receptor antagonists, including their promises and limitations. Given the persistently high rates of hospital-acquired hyponatremia, the importance of improving the management of hyponatremia seems both necessary and achievable.