Ecological transitions from marine to freshwater environments have been important in the creation of diversity among fishes. Evolutionary changes associated with these transitions likely involve modifications of osmoregulatory function. In particular, relaxed selection on hypo-osmoregulation should strongly affect animals that transition into novel freshwater environments. We used populations of the Alewife (Alosa pseudoharengus) to study evolutionary shifts in hypo-osmoregulatory capacity and ion regulation associated with freshwater transitions. Alewives are ancestrally anadromous, but multiple populations in Connecticut have been independently restricted to freshwater lakes; these landlocked populations complete their entire life cycle in freshwater. Juvenile landlocked and anadromous Alewives were exposed to three salinities (1, 20 and 30 ppt) in small enclosures within the lake. We detected strong differentiation between life history forms: landlocked Alewives exhibited reduced seawater tolerance and hypo-osmoregulatory performance compared to anadromous Alewives. Furthermore, gill Na⁺/K⁺-ATPase activity and transcription of genes for seawater osmoregulation (NKCC—Na⁺/K⁺/2Cl⁻ cotransporter and CFTR—cystic fibrosis transmembrane conductance regulator) exhibited reduced responsiveness to seawater challenge. Our study demonstrates that adaptations of marine-derived species to completely freshwater life cycles involve partial loss of seawater osmoregulatory performance mediated through changes to ion regulation in the gill.