Aquaporin-5 (AQP5) is a water-selective channel protein that is expressed in lacrimal glands, salivary glands, and distal lung. Several studies using AQP5 knockout mice have revealed that AQP5 plays an important role in maintaining water homeostasis in the lung. We report here that all-trans retinoic acid (atRA) increases plasma membrane water permeability, AQP5 mRNA and protein expression, and AQP5 promoter activity in MLE-12 cells. The promoter activation induced by atRA was diminished by mutation at the Sp1/Sp3 binding element (SBE), suggesting that the SBE mediates the effects of atRA. In addition, atRA increased the binding of Sp1 to the SBE without changing the levels of Sp1 in the nucleus. Taken together, our data indicate that atRA increases AQP5 expression through transactivation of Sp1, leading to an increase in plasma membrane water permeability.