Inhaled nitric oxide (iNO) has quickly become a standard therapy for term and near-term infants with hypoxic respiratory failure and persistent pulmonary hypertension. Its effect on the lung is believed to be through the stimulation of soluble guanylyl cyclase and the increased production of cyclic guanosine 3',5'-monophosphate (cGMP). However, in addition to pulmonary vasodilation and a decrease in pulmonary vascular resistance, nitric oxide (NO) shows several additional potential beneficial effects on the lung. This article reviews NO mechanisms of action, early clinical trial of iNO and clinical aspects for the use of iNO in acute respiratory failure of the term and near-tem neonates.