Previous studies support a model in which the physiological O-2 gradient is transduced by haemoglobin into the coordinate release from red blood cells of O-2 and nitric oxide (NO)-derived vasoactivity to optimize oxygen delivery in the arterial periphery(1,2). But whereas both O-2 and NO diffuse into red blood cells, only O-2 can diffuse out(3-5). Thus, for the dilation of blood vessels by red blood cells, there must be a mechanism to export NO-related vasoactivity, and current models of NO-mediated intercellular communication should be revised. Here we show that in human erythrocytes haemoglobin-derived S-nitrosothiol (SNO), generated from imported NO, is associated predominantly with the red blood cell membrane, and principally with cysteine residues in the haemoglobin-binding cytoplasmic domain of the anion exchanger AE1. Interaction with AE1 promotes the deoxygenated structure in SNO-haemoglobin, which subserves NO group transfer to the membrane. Furthermore, we show that vasodilatory activity is released from this membrane precinct by deoxygenation. Thus, the oxygen-regulated cellular mechanism that couples the synthesis and export of haemoglobin-derived NO bioactivity operates, at least in part, through formation of AE1-SNO at the membrane-cytosol interface.