Previous studies have shown that murine macrophages immunostimulated with interferon gamma and Escherichia coli lipopolysaccharide synthesize NO2-, NO3-, and citrulline from L-arginine by oxidation of one of the two chemically equivalent guanido nitrogens. The enzymatic activity for this very unusual reaction was found in the 100,000g supernatant isolated from activated RAW 264.7 cells and was totally absent in unstimulated cells. This activity requires NADPH and L-arginine and is enhanced by Mg2+. When the subcellular fraction containing the enzyme activity was incubated with L-arginine, NADPH, and Mg2+, the formation of nitric oxide was observed. Nitric oxide formation was dependent on the presence of L-arginine and NADPH and was inhibited by the NO2-/NO3- synthesis inhibitor NG-monomethyl-L-arginine. Furthermore, when incubated with L-[guanido-15N2]arginine, the nitric oxide was 15N-labeled. The results show that nitric oxide is an intermediate in the L-arginine to NO2-, NO3-, and citrulline pathway. L-Arginine is required for the activation of macrophages to the bactericidal/tumoricidal state and suggests that nitric oxide is serving as an intracellular signal for this activation process in a manner similar to that very recently observed in endothelial cells, where nitric oxide leads to vascular smooth muscle relaxation [Palmer, R. M. J., Ashton, D. S., & Moncada, S. (1988) Nature (London) 333, 664-666].