Nitric oxide (NO(.)) is a short-lived physiological messenger. Its various biological activities can be preserved in a more stable form of S-nitrosothiols (RS-NO). Here we demonstrate that at physiological NO(.) concentrations, plasma albumin becomes saturated with NO(.) and accelerates formation of low-molecular-weight (LMW) RS-NO in vitro and in vivo. The mechanism involves micellar catalysis of NO(.) oxidation in the albumin hydrophobic core and specific transfer of NO(+) to LMW thiols. Albumin-mediated S-nitrosylation and its vasodilatory effect directly depend on the concentration of circulating LMW thiols. Results suggest that the hydrophobic phase formed by albumin serves as a major reservoir of NO(.) and its reactive oxides and controls the dynamics of NO(.)-dependant processes in the vasculature.