The vasopressin type 2 receptor (V2R) is a G-protein coupled receptor that plays a central role in renal water reabsorption. Termination of ligand (vasopressin) stimulation is an important physiological regulatory event, but few proteins that interact with the V2R during downregulation after vasopressin (VP) binding have been identified. Using yeast 2-hybrid screening of a human kidney cDNA library, we show that a 100 kDa protein called Alix (ALG-2 interacting protein X) interacts with the last 29 amino acids of the V2R C-terminus. This was confirmed by pull-down assays using a GST-V2R-C-tail fusion protein. Alix was immunolocalized in principal cells of the kidney, which also express the V2R. The function of the Alix/V2R interaction was studied by transfecting Alix into LLC-PK1 epithelial cells expressing V2R-GFP. Under basal conditions, V2R-GFP localized mainly at the plasma membrane. Upon VP treatment, V2R-GFP was internalized into perinuclear vesicles in the non-transfected cells. In contrast, V2R-GFP fluorescence was virtually undetectable 2h after exposure to VP in cells that co-expressed Alix. Western blotting using an anti-GFP antibody showed marked degradation of the V2R after 2 h in the presence of VP and Alix, a time point at which little or no degradation was detected in the absence of Alix. The VP-induced disappearance of V2R-GFP was abolished by chloroquine, a lysosomal degradation inhibitor but not by MG132, a proteosome inhibitor. These data suggest that Alix increases the rate of lysosomal degradation of V2R and may play an important regulatory role in the VP response by modulating V2R down-regulation.