Membrane-bound regulatory carboxypeptidases cleave only COOH-terminal basic residues from peptides and proteins. To investigate whether carboxypeptidase-generated arginine can increase nitric oxide (NO) synthesis we perfused rat lungs from animals challenged with LPS or used rat lung microvascular endothelial cells (RLMVEC) stimulated with LPS and IFN-gamma, conditions that induced inducible NO synthase (iNOS) expression. Addition of carboxypeptidase substrate furylacryloyl-Ala-Arg (Fa-A-R) or Arg to the lung perfusate increased NO production two- to threefold. 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 inhibited by MGTA or lysine. Membrane fractions from rat lungs or RLMVEC contained carboxypeptidase M-like activity at neutral pH that increased twofold in RLMVEC treated with LPS + IFN-gamma. The kinetics of NO production in RLMVEC was measured with a porphyrinic microsensor. Addition of 1 mM Arg or Fa-A-R to cells preincubated in Arg-free medium resulted in a slowly rising, prolonged (>20 min) NO output. 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 microM 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 the Arg supply for NO production in inflammatory conditions may be maintained.