The mechanism by which hypoxia [low partial pressure of O₂ (pO₂)] elicits signaling to regulate pulmonary arterial pressure is incompletely understood. We considered the possibility that, in addition to its effects on smooth muscle, hypoxia may influence pulmonary vascular tone through an effect on RBCs. We report that exposure of native RBCs to sustained hypoxia is accompanied by a buildup of heme iron-nitrosyl (FeNO) species that are deficient in pO_2-governed intramolecular transfer of NO to cysteine thiol, yielding a deficiency in the vasodilator S-nitrosohemoglobin (SNO-Hb). S-nitrosothiol (SNO)-deficient RBCs produce impaired vasodilator responses in vitro and exaggerated pulmonary vasoconstrictor responses in vivo and are defective in oxygenating the blood. RBCs from hypoxemic patients with elevated pulmonary arterial pressure (PAP) exhibit a similar FeNO/SNO imbalance and are thus deficient in pO₂-coupled vasoregulation. Chemical restoration of SNO-Hb levels in both animals and patients restores the vasodilator activity of RBCs, and this activity is associated with improved oxygenation and lower PAPs.