The nonideal properties of solutions containing high concentrations of macromolecules can result in enormous increases in the activity of the individual macromolecules. It has been proposed that molecular crowding and confinement occur in cells and are major determinants of the activity of the proteins and other intracellular macromolecules. This concept has important implications for cell volume regulation because, under crowded conditions, relatively small changes in concentration, consequent to alterations of water content, lead to large changes in macromolecular activity. This review considers several aspects of macromolecular crowding and confinement, including: 1) the physical chemical principles involved; 2) in vitro demonstrations of the effects; 3) relation to water activity; 4) estimates of the actual intracellular activity of water and macromolecules; 5) relation to osmotic regulation in various types of cells, including bacteria, red blood cells, and complex nucleated cells; and 6) the relation to inorganic ions and organic osmolytes in cells stressed by hypertonicity. We conclude that, while there is compelling evidence for important effects of molecular crowding in vitro and in red blood cells, the role of macromolecular crowding and confinement in osmotic regulation of more complex cells is an open question that deserves the extensive attention it is currently receiving.