Vitamin D-elicited hypercalcemia/hypercalciuria is associated with polyuria in humans and in animal models. In rats, dihydrotachysterol (DHT) induces AQP2 water channel downregulation despite unaltered AQP2 mRNA expression and thus we investigated the mechanism of AQP2 degradation. Incubation of AQP2-containing inner medullary collecting duct (IMCD) endosomes with Ca²⁺ or calpain elicited AQP2 proteolysis, an effect abolished by leupeptin. This endogenous, Ca²⁺-sensitive protease activity exhibited a different proteolytic digest pattern from trypsin, which also degraded AQP2 in vitro. IMCDs contain abundant μ-calpain protein and functional calpain proteolytic activity as demonstrated by immunohistochemistry, immunoblotting, and gel zymography. Furthermore, by small particle flow cytometry we demonstrated that μ-calpain colocalizes with apical IMCD endosomes. DHT does not appear to elicit general proteolysis, however, in addition to AQP2 degradation, DHT treatment also diminished μ-calpain and calpastatin expression although whether these changes contributed to the AQP2 instability remains unclear. Together, these data show for the first time that AQP2 is a substrate for calpain-mediated proteolysis and that furthermore, μ-calpain, like AQP2, is both highly expressed in renal inner medulla and localized to apical IMCD endosomes.