The water channel protein PvTIP3;1 (alpha-TIP) is a member of the major intrinsic protein (MIP) membrane channel family. We overexpressed this eukaryotic aquaporin in the methylotrophic yeast Pichia pastoris, and immunogold labeling of cellular cryosections showed that the protein accumulated in the plasma membrane, as well as vacuolar and other intracellular membranes. We then developed an in vivo functional assay for water channel activity that measures the change in optical absorbance of spheroplasts following an osmotic shock. Spheroplasts of wild-type P. pastoris displayed a linear relationship between absorbance and osmotic shock level. However, spheroplasts of P. pastoris expressing PvTIP3;1 showed a break in this linear relationship corresponding to hypo-osmotically induced lysis. It is the difference between control and transformed spheroplasts under conditions of hypo-osmotic shock that forms the basis of our aquaporin activity assay. The aquaporin inhibitor mercury chloride blocked water channel activity but had no effect on wild-type yeast. Osmotically shocked yeast cells were affected only slightly by expression of the Escherichia coli glycerol channel GlpF, which belongs to the MIP family but is a weak water channel. The important role that aquaporins play in human physiology has led to a growing interest in their potential as drug targets for treatment of hypertension and congestive heart failure, as well as other fluid overload states. The simplicity of this assay that is specific for water channel activity should enable rapid screening for compounds that modulate water channel activity.