Studies in late gestation fetal sheep have provided several new insights into the regulation of amniotic fluid (AF) volume (AFV): There are four quantitatively important amniotic inflows and outflows that include fetal urine production, lung liquid secretion, swallowing, and intramembranous absorption. Of these, AFV is regulated primarily by modulating the rate of intramembranous absorption of AF water and solutes across the amniotic epithelial cells into the underlying fetal vasculature. Modulation of the rate of intramembranous absorption depends on the presence of stimulators and inhibitors present in the AF. A stimulator of intramembranous absorption is present in fetal urine. In addition, AF contains a non-renal, non-pulmonary inhibitor of intramembranous absorption presumably secreted by the fetal membranes. Although passive bidirectional movements of water and solutes occur across the intramembranous pathway, intramembranous absorption is primarily a unidirectional, vesicular, bulk transport process mediated through VEGF activation of transcytotic transport via caveolae. Further, the stimulators and inhibitors of intramembranous absorption alter only the active, unidirectional component of intramembranous absorption while the passive components are not altered under experimental conditions studied thus far. Future progress depends on identifying the cellular and molecular mechanisms that regulate active and passive intramembranous absorption as well as their regulatory components.