The present invention provides pharmaceutical compositions for treating neuromyelitis optica (NMO) comprising a therapeutically effective amount of loop C sequence-containing peptide of aquaporin-4 (AQP4) water channel, or a therapeutically effective fragment or variant thereof. The invention also provides methods for treating NMO by administering therapeutically effective amounts of loop C sequence-containing peptide(s) of AQP4, optionally in an immunosuppressive setting, and also provides diagnostics for detection of NMO in a subject, screening methods for identification of NMO-treating therapeutics and NMO model systems.