Interaction of the type 2 vasopressin receptor (V2R) with hormone causes desensitization and internalization. To study the role of the V2R NPxxY motif (which is involved in the clathrin-mediated endocytosis of several other receptors) in this process, we expressed FLAG-tagged wild-type V2R and a Y325F mutant V2R in LLC-PK1a epithelial cells that have low levels of endogenous V2R. Both proteins had a similar apical (35%) and basolateral (65%) membrane distribution. Substitution of Tyr325 with Phe325 prevented ligand-induced internalization of V2R determined by [3H]AVP binding and immunofluorescence but did not prevent ligand binding or signal transduction via adenylyl cyclase. Desensitization and resensitization of the V2R-Y325F mutation occurred independently of internalization. The involvement of clathrin in V2R downregulation was also shown by immunogold electron microscopy. We conclude that the NPxxY motif of the V2R is critically involved in receptor downregulation via clathrin-mediated internalization. However, this motif is not essential for the apical/basolateral sorting and polarized distribution of the V2R in LLC-PK1a cells or for adenylyl cyclase-mediated signal transduction.