Although the importance of red blood cells in augmenting hypoxic pulmonary vasoconstriction has been recognized for decades, only recently has it become clear that this occurs primarily because of the inactivation of nitric oxide (NO) by hemoglobin. This interaction between red blood cells, NO, and the pulmonary circulation is critical in understanding the effects of anemia and polycythemia on pulmonary blood flow distribution, gas exchange, and global O2 delivery and in understanding the development of hemoglobin-based oxygen carriers. This review will discuss the proposed mechanisms for initiation of hypoxic pulmonary vasoconstriction and regulation of hypoxic pulmonary vasoconstriction by red blood cells with an emphasis on hemoglobin-NO interactions. In addition, the review will discuss how biologic (S-nitrosation) or pharmacologic (cross-linking) modification of hemoglobin may affect pulmonary circulatory-hemoglobin interactions.