Endothelium-derived nitric oxide (NO) appears to be involved in the regulation of pulmonary vascular tone by O2. We hypothesized that the ability of blood to inhibit the vasodilation caused by NO would vary inversely with the saturation of hemoglobin by O2. To test this hypothesis, we used the pulmonary circulation of the unanesthetized fetal lamb as a bioassay for NO-induced vasodilation. Two to 3 days before the experiment, the main pulmonary artery, left atrium, carotid artery, and trachea of the fetus were catheterized and an ultrasonic blood flow transducer was placed around the proximal portion of the left pulmonary artery. On the day of the experiment, NO solution was prepared by bubbling 10% NO-90% N2 gas mixture in saline. This solution was injected into the fluid-filled potential air spaces of the fetal lungs via the trachea. At the highest dose (0.8 mumol), NO increased pulmonary blood flow fourfold and decreased pulmonary vascular resistance similarly. The dose-response curve for NO was similar to those obtained from isolated pulmonary blood vessels and gas-ventilated animals. Mixing NO solution with maternal arterial blood before injection decreased the effect of NO, and mixing it with venous blood virtually eliminated the effect. The decrease in fetal pulmonary vascular resistance caused by NO was inhibited by blood in inverse proportion to the saturation of hemoglobin with O2 in the blood (R2 = 0.93, P < or = 0.0001), confirming our hypothesis.