Frame-shift mutations within the C terminus of aquaporin 2 (AQP2) cause autosomal-dominant nephrogenic diabetes insipidus (AD-NDI). To identify the molecular mechanism(s) of this disease in vivo and to test possible therapeutic strategies, we generated a mutant AQP2 (763–772 del) knockin mouse. Heterozygous knockin mice showed a severely impaired urine-concentrating ability. However, they were able to slightly increase urine osmolality after dehydration. This milder phenotype, when compared with autosomal-recessive NDI, is a feature of AD-NDI in humans, thus suggesting successful establishment of an AD-NDI mouse model. Immunofluorescence of collecting duct cells in the AD-NDI mouse revealed that the mutant AQP2 was missorted to the basolateral instead of apical plasma membrane. Furthermore, the mutant AQP2 formed a heterooligomer with wild-type AQP2 and showed a dominant-negative effect on the normal apical sorting of wild-type AQP2 even under dehydration. Using this knockin mouse, we tested several drugs for treatment of AD-NDI and found that rolipram, a phosphodiesterase 4 inhibitor, was able to increase urine osmolality. Phosphodiesterase inhibitors may thus be useful drugs for the treatment of AD-NDI. This animal model demonstrates that a mutant monomer gains a dominant-negative effect that reverses the normal polarized sorting of multimers.