Agonist-dependent desensitization and internalization of G protein-coupled receptors (GPCR) are mediated by the binding of arrestins to phosphorylated receptors. The affinity of arrestins for the phosphorylated GPCR regulates the ability of the internalized receptor to be dephosphorylated and recycled back to the plasma membrane. In this study, we show that the naturally occurring loss of function vasopressin receptor mutation R137H, which is associated with familial nephrogenic diabetes insipidus, induces constitutive arrestin-mediated desensitization. In contrast to the wild-type vasopressin receptor, the nonsignaling R137H receptor is phosphorylated and sequestered in arrestin-associated intracellular vesicles even in the absence of agonist. Eliminating molecular determinants on the receptor that promote high affinity arrestin–receptor interaction reestablishes plasma membrane localization and the ability of the mutated receptors to signal. These findings suggest that unregulated desensitization can contribute to the etiology of a GPCR-based disease, implying that pharmacological targeting of GPCR desensitization may be therapeutically beneficial.