Intravesical Prostaglandin E2 (PGE2) was previously used to induce overactive bladder (OAB) symptoms as it reduces bladder capacity in rats and causes a "strong urgency sensation" in healthy women. However, the mechanism by which this occurs is unclear. To clarify how PGE2 reduces bladder capacity, 100 µM PGE2 was administered intravesically during open, single-fill cystometry with simultaneous measurement of sphincter EMG in the urethane-anesthetized female Wistar rat. PGE2 was also applied to the urethra or bladder selectively by use of a ligature at the bladder neck prior to (urethra) or during (bladder) closed-outlet, single-fill cystometry. Additional tests of urethral perfusion with PGE2 were made. PGE2 decreased bladder capacity, increased voiding efficiency, and increased sphincter EMG during open cystometry compared to saline controls. The number of non-voiding contractions did not change with PGE2, however, bladder compliance decreased. During closed-outlet cystometry, PGE2 applied only to the bladder or the urethra did not decrease bladder capacity. Urethral infusion of PGE2 decreased urethral perfusion pressure. Taken together, these results suggest that intravesical PGE2 may decrease bladder capacity by targeting afferents in the proximal urethra. This may occur through urethral relaxation and decreased bladder compliance, both of which may increase activation of proximal urethra afferents from distension of the proximal urethra. This hypothesis stands in contrast to many hypotheses of urgency that focus on bladder dysfunction as the primary cause of OAB symptoms. Targeting the urethra, particularly urethral smooth muscle, may be a promising avenue for the design of drugs and devices to treat OAB.