The Na-K-2Cl cotransporter 2 (NKCC2) was thought to be kidney specific. Here we show expression in the brain hypothalamo-neurohypophyseal system (HNS), wherein upregulation follows osmotic stress. The HNS controls osmotic stability through the synthesis and release of the neuropeptide hormone, arginine vasopressin (AVP). AVP travels through the bloodstream to the kidney, where it promotes water conservation. Knockdown of HNS NKCC2 elicited profound effects on fluid balance following ingestion of a high-salt solution—rats produced significantly more urine, concomitant with increases in fluid intake and plasma osmolality. Since NKCC2 is the molecular target of the loop diuretics bumetanide and furosemide, we asked about their effects on HNS function following disturbed water balance. Dehydration-evoked GABA-mediated excitation of AVP neurons was reversed by bumetanide, and furosemide blocked AVP release, both in vivo and in hypothalamic explants. Thus, NKCC2-dependent brain mechanisms that regulate osmotic stability are disrupted by loop diuretics in rats.