Production of nitric oxide by activated murine macrophages is thought to represent an important mechanism to restrict replication of the obligate intracellular parasite Toxoplasma gondii. In this study, we characterised the effect of T. gondii on nitric oxide production and expression of the inducible nitric oxide synthase and determined the functional significance of a parasite-induced evasion of this potential effector mechanism. Infection of primary bone marrow-derived macrophages or monocytic/macrophage RAW264.7 cells with a mouse-avirulent T. gondii strain significantly decreased nitric oxide production that had been induced by activation with either interferon-gamma or lipopolysaccharide or interferon-gamma plus lipopolysaccharide. Importantly, down-regulation of nitric oxide production by T. gondii enabled considerable parasite replication in macrophages activated with interferon-gamma alone or lipopolysaccharide alone. Furthermore, supplementation of endogenous nitric oxide by addition of sodium nitroprusside to levels as observed in uninfected interferon-gamma- or lipopolysaccharide-activated macrophages almost completely abrogated replication of T. gondii. Although T. gondii also partially inhibited the vigorous nitric oxide production induced by interferon-gamma along with lipopolysaccharide, the magnitude of inhibition did not suffice to allow intracellular propagation of the parasite in these synergistically activated macrophages. Inhibition of interferon-gamma-, lipopolysaccharide- and interferon-gamma plus lipopolysaccharide-induced nitric oxide production coincided with reduced inducible nitric oxide synthase protein levels. Such down-regulation required the presence of intracellular parasites as determined by immunofluorescence microscopy. Inducible nitric oxide synthase transcripts induced by interferon-gamma alone or in combination with lipopolysaccharide were also dose-dependently down-regulated after infection of RAW264.7 cells with T. gondii. In conclusion, this evasion strategy enables parasite replication in macrophages moderately activated by interferon-gamma or lipopolysaccharide, but does not suffice to evade the anti-parasitic activity of macrophages fully activated by interferon-gamma plus lipopolysaccharide. Nitric oxide production and its partial inhibition by the parasite may modulate the parasite-host equilibrium during toxoplasmosis.