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Arginine vasopressin (AVP) neurons in the hypothalamus are osmosensory neurons that respond to increased or decreased plasma osmolarity by releasing more or less AVP, respectively, from their axon terminals. Here, we found that, in contrast, hypo-osmotic stress enhanced somatodendritic AVP secretion from isolated rat AVP neurons, and this somatodendritic release depended on actin depolymerization. In AVP neurons identified by transgenic expression of green fluorescent protein, hypo-osmotic stimulation led to activation of anion currents and a slow regulatory volume decrease (RVD). Bath application of AVP increased the volume-sensitive anion current and accelerated RVD; these effects were abolished by inhibition of adenylate cyclase or by a specific antagonist of the V2-type vasopressin receptor. The V2 receptor antagonist slowed the RVD rate of AVP neurons even in the absence of exogenous AVP when the volume of bath solution was reduced. Reverse transcription polymerase chain reaction and immunostaining both indicated that the V2 receptor was present in AVP neurons. We conclude that somatodendritic release of AVP under hypo-osmotic conditions acts through the V2 receptor as an autocrine signal to enhance volume-sensitive anion channel activity and thereby facilitate cell volume regulation.