Previous studies suggest that while lung angiotensin converting enzyme (ACE) activity is reduced during chronic hypoxia, inhibitors of ACE attenuate hypoxic pulmonary hypertension. In an attempt to explain this paradox we investigated the possibility that whole lung ACE activity may not reflect local pulmonary vascular ACE expression. The experimental approach combined in vivo hemodynamic studies in control and chronically hypoxic rats, measurement of whole lung ACE activity, and evaluation of local pulmonary vascular ACE expression by in situ hybridization and immunohistochemistry. Total lung ACE activity was reduced to 50% of control activity by 5 d of hypoxia and remained low for the duration of the study. Immunohistochemistry showed a marked reduction of ACE staining in alveolar capillary endothelium. However, an increase in ACE staining was observed in the walls of small newly muscularized pulmonary arteries at the level of alveolar ducts and walls. In situ hybridization studies showed increased signal for ACE mRNA in the same vessels. Inhibition of ACE by captopril during chronic hypoxia attenuated pulmonary hypertension and markedly reduced distal muscularization of small pulmonary arteries. In addition, we demonstrated marked longitudinal variation in ACE expression along the normal pulmonary vasculature with the highest levels found in small muscular arteries associated with terminal and respiratory bronchioles. We conclude that local ACE expression is increased in the walls of small pulmonary arteries during the development of hypoxic pulmonary hypertension, despite a generalized reduction in alveolar capillary ACE expression, and we speculate that local arteriolar ACE may play a role in the vascular remodeling associated with pulmonary hypertension.