The neurohormone arginine vasopressin plays a significant role in the regulation of volume homeostasis, which is mediated via vasopressin type 2 (V2) receptors in the collecting tubules of the kidney. Diseases that are accompanied by abnormal volume homeostasis, including congestive heart failure and cirrhosis, are a frequent cause of hospital admissions and increasing healthcare costs. Recently, several nonpeptide V2 receptor antagonists have emerged as promising agents in the management of these conditions with the advantage of having no electrolyte abnormalities, neurohormonal activation or worsening renal insufficiency. Tolvaptan, a highly selective nonpeptide V2 receptor antagonist, has demonstrated an improvement in the volume status, osmotic balance and haemodynamic profile in preclinical and Phase II trials in patients with congestive heart failure and is currently undergoing testing in Phase III trials. This review discusses the evidence for the potential uses of tolvaptan, and its pharmacology and pharmacokinetics, particularly in congestive heart failure.