To investigate the underlying causes for aldose reductase deficiency-induced diabetes insipidus, we carried out studies with three genotypic groups of mice. These included wild-type mice, knockout mice, and a newly created bitransgenic line that was homozygous for both the aldose reductase null mutation and an aldose reductase knockin transgene driven by the kidney-specific cadherin promoter to direct transgene expression in the collecting tubule epithelial cells. We found that from early renal developmental stages onward, urine osmolality did not exceed 1,000 mosmol/kgH2O in aldose reductase-deficient mice. The functional defects were correlated with significant renal cellular and structural abnormalities that included cell shrinkage, apoptosis, disorganized tubular and vascular structures, and segmental atrophy. In contrast, the transgenic aldose reductase expression in the bitransgenic mice largely but incompletely rescued urine concentrating capacity and significantly improved renal cell survival, cellular morphology, and renal structures. Together, these results suggest that aldose reductase not only plays important roles in osmoregulation and medullary cell survival but may also be essential for the full maturation of the urine concentrating mechanism.