Familial neurohypophysial diabetes insipidus (FNDI) is an autosomal dominant trait in which expression of a mutant vasopressin prohormone reduces vasopressin production. We investigated the NP85 Cys→Gly mutant vasopressin prohormone in a large kindred in The Netherlands. We demonstrate that growth retardation is an important early sign in two children from this kindred, which recuperates by substitution therapy with 1-desamino-8-d-arginine vasopressin. To obtain clues about the basis for the dominant inheritance of FNDI, we analyzed the trafficking and processing of the mutant vasopressin prohormone in cell lines by metabolic labeling and immunoprecipitation. The mutant vasopressin prohormone was retained in the endoplasmic reticulum and thus was not processed to vasopressin. This defect was not caused by dimerization of the vasopressin prohormone via its unpaired cysteine residue. High level expression of the mutant vasopressin prohormone in cell lines resulted in strong accumulation in the endoplasmic reticulum and an altered morphology of this organelle. We hypothesize that disturbance of the endoplasmic reticulum results in dysfunction and ultimately cell death of the cells expressing the mutant prohormone. Our data support the hypothesis that FNDI is a progressive neurodegenerative disease with delayed onset of symptoms. Its treatment requires early detection of symptoms for which growth parameters are useful.