Cranial diabetes insipidus (DI) arises when release of arginine vasopressin (AVP, antidiuretic hormone) in response to osmotic stimuli is inadequate. The correct diagnosis and management of cranial DI is particularly important when it arises as an acute complication of surgery, trauma or in subjects who lack thirst sensation. Desmopressin (1-desamino-8-D-arginine-vasopressin, DDAVP) provides an effective and convenient replacement therapy when given by the intranasal route. However, nasal administration is difficult for some patients, and in the future oral or transcutaneous desmopressin formulations may prove to be satisfactory alternatives. By contrast, treatments for nephrogenic DI, where there is failure of the antidiuretic response to endogenous or exogenous vasopressin, have been disappointing and water replacement remains the mainstay of therapy. An understanding of the physiology and pathophysiology of water homeostasis and correct interpretation of water balance and electrolyte data are essential for correct diagnosis and management of all cases of DI.