Arginine vasopressin (AVP) interacts with V1 and V2 receptors to stimulate hydrolysis of phosphoinositides (PI) and formation of cAMP, respectively. The effects of AVP on V2 receptors in the kidney are well characterized. In order to determine whether V1 receptors, coupled to phospholipase C for hydrolysis of PI, are also present in the kidney, we investigated the effects of AVP on PI hydrolysis in tissue slices from the cortex, outer medulla, and inner medulla of the rabbit kidney. We found that 10(-6) M AVP produced a significant increase in PI hydrolysis in the inner and outer medulla but not in the cortex. In the inner medulla, AVP (10(-10) M) produced a greater than 50% increase in PI hydrolysis; the effect was much greater at higher concentrations. AVP-stimulated PI hydrolysis was blocked by a V1 antagonist but not by a V2 antagonist. Increasing the osmolality of the incubation to 600 mosmol/kg water also abolished the effect of AVP on PI hydrolysis in the inner medulla. Furthermore, AVP did not stimulate PI hydrolysis (even in isoosmotic media) in isolated inner medullary collecting duct cells which make a major portion of the inner medulla. Our results indicate: 1) V1 receptors linked to PI system are not present in the inner medullary collecting duct cells but are probably present in blood vessels and/or interstitial cells of the renal medulla; and 2) AVP-stimulated PI hydrolysis in the inner medulla is modulated by the osmolality of the extracellular fluid.