We have developed a transgenic system that, for the first time, facilitates monitoring of the regulatory dynamics of a central peptidergic system from transcription of a neuropeptide gene to the storage and release of the mature secretory product. A rat vasopressin (VP) transgene (5-VCAT-3), the expression of which is restricted to hypothalamic vasopressinergic magnocellular neurons in rats, contains a sequence that, if translated, would place a unique hexadecapeptide (DRSAGYYGLFKDRKEK, abbreviated to DR-12-EK) at the C-terminus of the VP precursor. We have raised an antibody against this "tag" and, using immunohistochemistry, electron microscopy, RIA, and HPLC, have shown for the first time that a VP transgene RNA is translated into a protein product found, in a processed form, in secretory granules in the posterior pituitaries of transgenic rats. Disruption of the C-terminus of the VP precursor by the peptide tag is well tolerated and does not disrupt VP production or disturb salt and water balance. An osmotic stimulus increased hypothalamic DR-12-EK levels, but changes in posterior pituitary DR-12-EK levels were more complex. After 5 days of salt-loading, DR-12-EK levels fell, as would be expected if its release was coordinate with that of VP. However, after 10 days of salt-loading, posterior pituitary DR-12-EK levels increased, despite the lower level of VP. This probably reflects the greater response of the transgene to osmotic challenge at the RNA level, increasing the proportion of DR-12-EK-containing translation products transported to the posterior pituitary relative to those derived from the endogenous gene. The exaggerated response of the tagged transgene to osmotic challenge at both RNA and protein levels affords a new opportunity to study the regulatory dynamics of the VP system at the molecular level, but within the physiologically advantageous context of the intact animal.