The arginine vasopressin (AVP) type 2 receptor (V2R) is unique among AVP receptor subtypes in signaling through cAMP. Its key function is in the kidneys, facilitating the urine-concentrating mechanism through the AVP/V2-type receptor/aquaporin 2 system in the medullary and cortical collecting ducts. Recent clinical and research observations strongly support the existence of extrarenal V2R. The clinical importance of extrarenal V2R spans widely from stimulation of coagulation factor in the endothelium, to as yet untested potential therapeutic targets. These include V2R-regulated membranous fluid turnover in the inner ear, V2R-regulated mitogensis and apoptosis in certain tumor tissue, and numerous other cell types where the physiological role of V2R still requires further research. Here, we review current evidence on the physiological and pathophysiological functions of renal and extrarenal V2R. These functions of the V2R are important, not only in rare diseases with loss or gain of function of the V2R, but also in relation to the recent use of non-peptide V2R antagonists to treat hyponatremia and possibly retard the growth of cysts and development of renal failure in autosomal dominant polycystic kidney disease. The main functions of the V2R are reabsorption of water and urea in the principal cells of the collecting duct, and vasodilation and stimulation of coagulation factor properties, mainly seen with pharmacological doses of dDAVP. The AVPR2 gene is located on the X chromosome, in a region with high probability of escape from inactivation; this may lead to phenotypic gender differences, with females expressing higher levels of transcript than males.