Brain NO (nitric oxide) synthase contains FAD, FMN, heme, and tetrahydrobiopterin as prosthetic groups and represents a multi-functional oxidoreductase catalyzing oxidation of L-arginine to NO and L-citrulline, formation of H2O2, and reduction of cytochrome c. We show that substrate analogues and inhibitors interacting with the heme block both the reductive activation of oxygen and the oxidation of L-arginine without affecting cytochrome c reduction. We further demonstrate that N omega-hydroxy-L-arginine is an intermediate in enzymatic NO synthesis. The ratio of L-citrulline to free N omega-hydroxy-L-arginine was > or = 50 under various assay conditions, but could markedly be reduced down to 4 by redox active inhibitors. Brain NO synthase is shown to utilize both L-arginine and N omega-hydroxy-L-arginine for the formation of stoichiometric amounts of NO and L-citrulline. Tetrahydrobiopterin equally enhanced reaction rates from either substrate (approximately 5-fold), but its rate accelerating effects were only observed at NADPH concentrations > or = 3 microM. In the absence of L-arginine or tetrahydrobiopterin, brain NO synthase catalyzes the generation of H2O2. We now show that, in contrast to L-arginine, N omega-hydroxy-L-arginine fully blocked H2O2 formation in the absence of exogenous tetrahydrobiopterin, indicating that N omega-hydroxy-L-arginine is a direct inhibitor of enzymatic oxygen activation. Based on these data, a hypothetical mechanism of enzymatic NO formation is discussed.