The effects of hypercapnia (CO₂) confined to either the alveolar space or the intravascular perfusate on exhaled nitric oxide (NO), perfusate NO metabolites (NOx), and pulmonary arterial pressure (Ppa) were examined during normoxia and progressive 20-min hypoxia in isolated blood- and buffer-perfused rabbit lungs. In blood-perfused lungs, when alveolar CO₂ concentration was increased from 0 to 12%, exhaled NO decreased, whereas Ppa increased. Increments of intravascular CO₂ levels increased Ppa without changes in exhaled NO. In buffer-perfused lungs, alveolar CO₂ increased Ppa with reductions in both exhaled NO from 93.8 to 61.7 (SE) nl/min (P < 0.01) and perfusate NOx from 4.8 to 1.8 nmol/min (P < 0.01). In contrast, intravascular CO₂ did not affect either exhaled NO or Ppa despite a tendency for perfusate NOx to decline. Progressive hypoxia elevated Ppa by 28% from baseline with a reduction in exhaled NO during normocapnia. Alveolar hypercapnia enhanced hypoxic Ppa response up to 50% with a further decline in exhaled NO. Hypercapnia did not alter the apparent K_m for O₂, whereas it significantly decreased the V_max from 66.7 to 55.6 nl/min. These results suggest that alveolar CO₂ inhibits epithelial NO synthase activity noncompetitively and that the suppressed NO production by hypercapnia augments hypoxic pulmonary vasoconstriction, resulting in improved ventilation-perfusion matching.