Background. We recently demonstrated that inhibition of inducible nitric oxide synthase (iNOS) ameliorated severe acute lung allograft rejection. This study used a rat lung transplant model to determine (1) the time course and cellular localization of iNOS expression during the histological progression of unmodified acute rejection and (2) whether inhibition of iNOS prevented impaired gas exchange function of the allograft lung and/or ameliorated the histological changes of acute rejection. Methods and Results. iNOS mRNA and enzyme activity were expressed in allograft lungs during mild, moderate, and severe acute rejection, but not in normal, isograft, or allograft lungs before histological changes of mild acute rejection. iNOS expression in allografts resulted in elevated serum nitrite/nitrate levels, indicative of increased in viva nitric oxide (NO) production. In situ hybridization demonstrated iNOS mRNA expression in infiltrating inflammatory cells, but not in allograft parenchymal cells. Allografts had significantly impaired gas exchange, which was prevented with the selective iNOS inhibitor aminoguanidine (PaO2 of 566±19, 76±22, and 504±105 mmHg for isograft, allograft, and aminoguanidine-treated allograft, respectively; P<0.0002). Aminoguanidine also significantly improved the histological rejection scores. Conclusions. (1) iNOS expression and increased NO production occurred during the early stages of acute rejection, persisted throughout the unmodified rejection process, and localized to infiltrating inflammatory cells, but not allograft parenchymal cells; (2) aminoguanidine ameliorated the histological and functional changes of acute rejection; and (3) increased NO production, detected by the presence of iNOS mRNA, protein, or noninvasively by measuring serum nitrite/nitrate levels, may serve as an early marker of acute allograft rejection.