Autosomal nephrogenic diabetes insipidus (NDI), a disease in which the kidney is unable to concentrate urine in response to vasopressin, is caused by mutations in the Aquaporin-2 (AQP2) gene. Analysis of a new family with dominant NDI revealed a single nucleotide deletion (727deltaG) in one AQP2 allele, which encoded an AQP2 mutant with an altered and extended C-terminal tail. When expressed in oocytes, the tetrameric AQP2-727deltaG was retained within the cell. When co-expressed, AQP2-727deltaG, but not a mutant in recessive NDI (AQP2-R187C), formed hetero-oligomers with wild-type (wt) AQP2 and reduced the water permeability of these oocytes, because of a reduced plasma membrane expression of wt-AQP2. Expressed in renal epithelial cells, AQP2-727deltaG predominantly localized to the basolateral membrane and late endosomes/lysosomes, whereas wt-AQP2 was expressed in the apical membrane. Upon co-expressing in these cells, wt-AQP2 and AQP2-727deltaG mainly co-localized to late endosomes/lysosomes. In conclusion, hetero-oligomerization of AQP2-727deltaG with wt-AQP2 and consequent mistargeting of this complex to late endosomes/lysosomes results in absence of AQP2 in the apical membrane, which can explain dominant NDI in this family. Together with other mutants in dominant NDI, our data reveal that a misrouting, instead of a lack of function, is a general mechanism for the 'loss of function' phenotype in dominant NDI and visualizes for the first time a mislocalization of a wild-type protein to late endosomes/lysosomes in polarized cells after oligomerization with a mutant protein.