1. Whole-cell recordings were obtained from type I paraventricular nucleus (PVN) neurones in coronal slices of rat hypothalamus to study the involvement of nitric oxide (NO) in the modulation of inhibitory transmission resulting from the activation of N-methyl-D-aspartate (NMDA) receptors by the high affinity receptor agonist D,L-tetrazol-5-ylglycine. 2. A brief pulse of NMDA agonist (0.1-10 microM) faithfully elicited increases in action potential firing frequency in all type I cells tested (n = 55). In cells with membrane potentials positive to -75 mV, this excitation was accompanied by an underlying depolarization (> 2 mV) in the majority of cases (n = 45). At membrane potentials negative to -75 mV, NMDA agonist application elicited an initial monotonie depolarization, which was auxiliary to profound, rhythmic oscillations of the membrane potential, resulting in the emergence of burst-like activity in these cells (n = 8). 3. In addition to depolarizing the neurones, the NMDA agonist also elicited inhibitory postsynaptic potentials (IPSPs) in 40% (n = 22) of the cells tested. The IPSPs were inhibited by the GABAA receptor antagonist bicuculline methiodide (BMI). 4. Microdialysis of NO into the PVN has been shown to increase local levels of inhibitory neurotransmitters, including GABA. The possibility that NO-induced increases in GABA lead to an increase in inhibitory synaptic activity in PVN was investigated by administering NO by three different methods. Bath application of the donor compound, S-nitroso-N-acetyl-penicillamine (SNAP; n = 7), bubbled NO solution (n = 5), or the NO precursor L-arginine (n = 6) all elicited increases in IPSP frequency. 5. Production of NO in other brain centres has been linked to the activation of the NMDA receptor. In order to determine whether the increase in IPSPs following NMDA was the result of activation of NO, the production of NO was blocked with the NO synthase inhibitor N omega-nitro-L-arginine methylester (L-NAME). Subsequent NMDA receptor activation elicited more pronounced depolarizations, but there was no accompanying increase in IPSP frequency (n = 5). 6. This study demonstrates that GABAergic inhibition resulting from NMDA receptor activation can be regulated profoundly by NO. By increasing inhibitory transmission within a nucleus, NO may serve as an important intermediary in the regulation of neuronal excitability in the central nervous system.