Treatment of bullfrog urinary bladder with arginine vasopressin (AVP) elicited a dose-dependent increase in the basal movement of water and sodium across isolated tissues. Epithelial cells from the mucosal surface and incubated with 10 ml) AVP/ml for 30 min retained a greater amount of intracellular water and calcium than cells not treated with hormone. The epithelial cells were further separated into two major fractions by density gradient centrifugation; cells damaged during these manipulations were separated from viable cells and discarded. Morphologcal examination of the two respective fractions indicated that they largely consisted of mitochondria-rich (MR) and granular (G) cell types which line the lumen of bullfrog bladder. The calcium content of MR cells averaged 25% greater than that of G-type cells. G cells had a markedly higher content of the characteristic lysosomal hydrolases, acid phosphatase and cathepsin B1, than that found in MR cells. Incubation of G cells with AVP elicited significant increments in water and calcium contents and extracellular release of lysosomal enzymes as compared to untreated cells. Among MR cells treated with AVP, cell calcium declines slightly but no significant increase in water content or extracellular hydrolase activity was detected in comparison with paired control cells. The physiological significance of acid proteinase release from G cells treated with AVP was evaluated in experiments with intact bladder. Proteinase inhibitors which suppress the activity of cathepsin Bl selectively antagonized the action of hormone on water permeation. The data suggest that alterations in the calcium and lysosomal hydrolase activity associated with G cells exposed to AVP may contribute to the hormone-induced water flow observed across the intact epithelium.