Cholangiocytes, epithelial cells lining the biliary tree, have primary cilia extending from their apical membrane into the ductal lumen. Although important in disease, cilia also play a vital role in normal cellular functions. We reported that cholangiocyte cilia are sensory organelles responding to mechanical stimuli (i.e., luminal fluid flow) by alterations in intracellular Ca(2+) and cAMP. Because cholangiocyte cilia are also ideally positioned to detect changes in composition and tonicity of bile, we hypothesized that cilia also function as osmosensors. TRPV4, a Ca(2+)-permeable ion channel, has been implicated in signal transduction of osmotic stimuli. Using purified rat cholangiocytes and perfused intrahepatic bile duct units (IBDUs), we found that TRPV4 is expressed on cholangiocyte cilia, and that hypotonicity induces an increase in intracellular Ca(2+) in a TRPV4-, ciliary-, and extracellular calcium-dependent manner. The osmosensation of luminal tonicity by ciliary TRPV4 induces bicarbonate secretion, the main determinant of ductal bile formation, by a mechanism involving apical ATP release. Furthermore, the activation of TRPV4 in vivo, by its specific agonist, 4alphaPDD, induces an increase in bile flow as well as ATP release and bicarbonate secretion. Our results suggest that cholangiocyte primary cilia play an important role in ductal bile formation by acting as osmosensors.