The suprachiasmatic nuclei (SCN) serve as the principal circadian pacemaker that coordinate daily cycles of behavior and physiology for mammals. A network of transcriptional and translational feedback loops underlies the operating molecular mechanism for circadian oscillation within the SCN neurons. It remains unclear how timing information is transmitted from SCN neurons to eventually evoke circadian rhythms. Intercellular communication between the SCN and its target neurons is critical for the generation of coherent circadian rhythms. At the molecular level, neuropeptides encoded by clock-controlled genes have been indicated as important output mediators. Arginine-vasopressin (AVP) is the product of one such clock-controlled gene. Previous studies have demonstrated a circadian rhythm of AVP levels in the cerebrospinal fluid and the SCN. The physiological effects of AVP are mediated by three types of AVP receptors, designated as V1a, V1b and V2. Here, we report that V1 mRNA levels displayed a circadian rhythm in the SCN, peaking during night hours. The circadian rhythmicity of locomotor activities was significantly reduced in V1-deficient (V1^-/-) mice (50-75% reduction in the power of Fast Fourier Transformation). However, the light masking and light-induced phase shift effects are intact in V1^-/- mice. Whereas the expression of clock core genes was unaltered, the circadian amplitude of prokineticin 2 (PK2) mRNA oscillation was attenuated in the SCN of V1^-/- mice (~50% reduction in the peak levels). In vitro experiments demonstrated that AVP, acting through V1a receptor, was able to enhance the transcriptional activity of the PK2 promoter. These studies thus indicate that AVP-V1a signaling plays an important role in the generation of overt circadian rhythms.