Liver X Receptors (LXRs) including LXRα and LXRβ are nuclear receptor transcription factors and play an important role in lipid and glucose metabolism. It has been previously reported that mice lacking LXRβ but not LXRα develop a severe urine concentrating defect, likely via a central mechanism. Here we provide evidence that LXRβ regulates water homeostasis through increasing aquaporin 2 (AQP2) protein levels in renal collecting ducts. LXRβ-/- mice exhibited a reduced response to dDAVP stimulation, suggesting that the diabetes insipidus phenotype is of both central and nephrogenic origin. AQP2 protein abundance in the renal inner medulla was significantly reduced in LXRβ-/- mice but with little change in AQP2 mRNA levels. In vitro studies showed that AQP2 protein levels were elevated upon LXR agonist treatment in both primary cultured mouse inner medullary duct cells (mIMCD) and the mIMCD3 cell line with stably expressed AQP2. In addition, LXR agonists including TO901317 and GW3965 failed to induce AQP2 gene transcription but diminished its protein ubiquitination in primary cultured mIMCD cells, thereby inhibiting its degradation. Moreover, LXR activation-induced AQP2 protein expression was abolished by the protease inhibitor MG132 and the ubiquitination-deficient AQP2 (K270R). Taken together, the present study demonstrates that activation of LXRβ increases AQP2 protein levels in the renal collecting ducts via a posttranscriptional mechanism. As such, LXRβ represents a key regulator of body water homeostasis.