Nitric oxide causes dilation of the pulmonary circulation and reduction in net lung liquid production in the fetal lamb, two critical perinatal events. Phosphodiesterase inhibition alone causes similar changes and also enhances the effects of nitric oxide. To better define the cyclic guanosine 5'-monophosphate (GMP) pathway in these events, we studied the effects of a specific phosphodiesterase inhibitor, E4021, on pulmonary arteries and veins isolated from near-term fetal lambs, as well as in intact, chronically instrumented late-gestation fetal lambs. In the in vitro experiments, both pulmonary arteries and veins relaxed to E4021 in a dose-dependent manner, although pulmonary veins were significantly more sensitive to E4021. Pretreatment with N(G)-nitro-l-arginine (L-NNA) abolished this response in arteries but not in veins. In both arteries and veins, pretreatment with beta-phenyl-1,N2-etheno-8-bromoguanosine-3',5'-cyclic monophosphorothionate blunted relaxations to E4021. In the in vivo experiments, E4021 infusion into either the pulmonary artery or central venous circulation increased pulmonary blood flow and decreased pulmonary vascular resistance, and these responses were blunted by pretreatment with L-NNA. Net lung liquid production, measured by a dye-dilution technique using blue dextran, decreased when E4021 was infused directly into the pulmonary artery and this effect was not altered by L-NNA. There was no effect on lung liquid production when E4021 was infused into the central venous circulation. Taken together, these results suggest that the pulmonary hemodynamic effects of E4021 involve the cyclic GMP pathway and are primarily nitric oxide synthase dependent. In contrast, the effects on E4021 on net lung liquid production appear to be independent of nitric oxide synthase, suggesting that these two critical perinatal events might be modulated independently.