The administration of diphenylamine [DPA] to rats induces an acquired form of cystic disease. In order to examine the early changes in this model of experimental cystic disease prior to the development of the more severe structural alterations, clearance, micropuncture and morphologic studies were performed in rats fed DPA for 3-6 wk. A significant defect in maximal urine concentrating ability (Umax) was manifest by the 2nd wk and averaged 50% of control values. Further studies were undertaken to examine the cause of the defect in Umax. Whole-kidney glomerular filtration rate (GFR), single-nephron GFR, end-proximal inulin tubular fluid-plasma ratio, glucose and bicarbonate reabsorption were all normal, indicating normal function of the proximal tubule. Free water clearance and free water reabsorption were not significantly different in DPA-treated rats as compared to controls, suggesting normal function of the ascending limb of the loop of Henle and collecting duct. Morphologic examination revealed gross cysts in less than 10% of the kidneys but structural changes were consistently demonstrated in the collecting ducts of DPA-treated rats. The decrease in Umax in DPA-treated animals is apparently the result of a defect located at the terminal portion of the collecting duct.