Vasopressin regulates body water conservation by redistributing aquaporin-2 (AQP2) water channels from intracellular vesicles to the apical surface of renal collecting ducts, resulting in water reabsorption from urine. Mutations in AQP2 cause autosomal nephrogenic diabetes insipidus (NDI), a disease characterized by the inability to concentrate urine. Here, we report a frame-shift mutation in AQP2 causing dominant NDI. This AQP2 mutant is a functional water channel when expressed in Xenopus oocytes. However, expressed in polarized renal cells, it is misrouted to the basolateral instead of apical plasma membrane. Additionally, this mutant forms heterotetramers with wild-type AQP2 and redirects this complex to the basolateral surface. The frame shift induces a change in the COOH terminus of AQP2, creating both a leucine- and a tyrosine-based motif, which cause the reversed sorting of AQP2. Our data reveal a novel cellular phenotype in dominant NDI and show that dominance of basolateral sorting motifs in a mutant subunit can be the molecular basis for disease.