It is well established that nitric oxide (NO) acts as a signalling molecule in the nervous system of both mammals and insects. In contrast to classical transmitters, the membrane-permeant NO can act on neighbouring targets limited by half-life and diffusion barriers. This type of diffuse signalling seems to be evolutionarily highly conserved and recent findings concerning the characterization and function of the NO system in insects are summarized in this review. Firstly, the properties and the localization of the NO forming enzyme, the NO synthase (NOS), are described. In the nervous system the brain contains by far the highest NOS activity. As an evolutionary peculiarity, a blood-feeding bug exhibits high NOS activity in the salivary glands. Secondly, the soluble guanylate cyclase (sGC), a major target of NO action, and cGMP-regulated enzymes like cGMP-dependent protein kinase and cyclic nucleotide gated channels are described. Anatomical organization of the NO/cGMP system in insects reveals evidence for a cellular separation of the release site and target site of NO, although in the antennal lobes of the locust an exception from this rule exists. Thirdly, the implication of the NO system in neuronal function in insects is described. In the honeybee, the NO/cGMP system in the antennal lobes is implicated in the processing of adaptive mechanisms during chemosensory processing, and recent findings support a specific role of the NO system in memory formation. Discussion of the results in insects with regard to properties and functions of the vertebrate NO system is attempted.