Prostanoids are prominent, yet complex, components in the maintenance of body water homeostasis. Recent functional and molecular studies have revealed that the local lipid mediator PGE2 is involved both in water excretion and absorption. The biologic actions of PGE2 are exerted through four different G-protein-coupled receptors; designated EP1-4, which couple to separate intracellular signaling pathways. Here, we discuss new developments in our understanding of the actions of PGE2 that have been uncovered utilizing receptor specific agonists and antagonists, EP receptor and PG synthase knockout mice, polyuric animal models, and the new understanding of the molecular regulation of collecting duct water permeability. The role of PGE2 in urinary concentration comprises a variety of mechanisms, which are not fully understood and likely depend on which receptor is activated under a particular physiologic condition. EP3 and microsomal PG synthase type 1 play a role in decreasing collecting duct water permeability and increasing water excretion, whereas EP2 and EP4 can bypass vasopressin signaling and increase water reabsorption through two different intracellular signaling pathways. PGE2 has an intricate role in urinary concentration, and we now suggest how targeting specific prostanoid receptor signaling pathways could be exploited for the treatment of disorders in water balance.