We have recently demonstrated that inhibition of Rho GTPase with Clostridium difficile toxin B, or with Clostridium botulinum C3 toxin, causes actin depolymerization and translocation of aquaporin 2 (AQP2) in renal CD8 cells in the absence of hormonal stimulation. Here we demonstrate that Rho inhibition is part of the signal transduction cascade activated by vasopressin leading to AQP2 insertion into the apical membrane. Quantitation of active RhoA (GTP-bound) by selective pull down experiments demonstrated that the amount of active RhoA decreased upon stimulation of CD8 cells with the cAMP-elevating agent forskolin. Consistent with this observation, forskolin treatment resulted in a decreased expression of membrane-associated (active) Rho, as assessed by cell fractionation followed by western blotting analysis. In addition, the abundance of the endogenous Rho GDP dissociation inhibitor (Rho-GDI) was found to have decreased in the membrane fraction after forskolin stimulation. Co-immunoprecipitation experiments revealed that, after forskolin stimulation, the amount of Rho-GDI complexed with RhoA increased, suggesting that Rho GTPase inhibition occurs through association of RhoA with Rho-GDI. Finally, forskolin stimulation was associated with an increase in Rho phosphorylation on a serine residue, a protein modification known to stabilize the inactive form of RhoA and to increase its interaction with Rho-GDI. Taken together, these data demonstrate that RhoA inhibition through Rho phosphorylation and interaction with Rho-GDI is a key event for cytoskeletal dynamics controlling cAMP-induced AQP2 translocation.