Membrane-bound regulatory carboxypeptidases cleave only C-terminal basic residues from peptides and proteins. To investigate whether carboxypeptidase-generated arginine can increase NO synthesis we perfused rat lungs from animals challenged with lipopolysaccharide (LPS) or used rat lung microvascular endothelial cells (RLMVEC) stimulated with LPS and interferon-, conditions which induced iNOS expression. Addition of carboxypeptidase substrate furylacryloyl-Ala-Arg (Fa-A-R) or Arg to the lung perfusate increased NO production 2-3 fold. The carboxypeptidase inhibitor, 2-mercaptomethyl-3-guanidinoethylthiopropanoic acid (MGTA), blocked the effect of Fa-A-R but not free Arg. Lysine, an Arg-transport inhibitor, blocked the increase in NO stimulated by Fa-A-R. HPLC analysis showed that Fa-A-R hydrolysis was blocked by MGTA but not lysine. In cytokine-treated RLMVEC, Fa-A-R also stimulated NO production that was inhibited by either MGTA or lysine. Membrane fractions from rat lungs or RLMVEC contained carboxypeptidase M-like activity at neutral pH which increased 2-fold in RLMVEC treated with LPS + interferon-. The kinetics of NO production in RLMVEC was measured with a porphyrinic microsensor. Addition of either 1 mM Arg or Fa-A-R to cells preincubated in Arg-free medium resulted in a slowly rising, prolonged (>20 min) output of NO. NO production stimulated by Fa-A-R was blocked by MGTA or iNOS inhibitor 1400W. HPLC analysis of Fa-A-R hydrolysis revealed only 3.7 µM Arg was released over 20 min. Thus, NO production in RLMVEC is stimulated more efficiently by Arg released from carboxypeptidase substrates than free Arg. These studies reveal a novel mechanism by which Arg supply for NO production in inflammatory conditions may be maintained.