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We summarize and critically review osmotic stress studies of the G-protein-coupled receptor rhodopsin. Although small amounts of structural water are present in these receptors, the effect of bulk water on their function remains uncertain. Studies of the influences of osmotic stress on the GPCR archetype rhodopsin have given insights into the functional role of water in receptor activation. Experimental work has discovered that osmolytes shift the metarhodopsin equilibrium after photoactivation, either to the active or inactive conformations according to their molar mass. At least 80 water molecules are found to enter rhodopsin in the transition to the photoreceptor active state. We infer that this movement of water is both necessary and sufficient for receptor activation. If the water influx is prevented, e.g., by large polymer osmolytes or by dehydration, then the receptor functional transition is back shifted. These findings imply a new paradigm in which rhodopsin becomes solvent swollen in the activation mechanism. Water thus acts as an allosteric modulator of function for rhodopsin-like receptors in lipid membranes.