Nitric oxide (NO) is considered a diffusible messenger involved in neuronal communication, although the post-synaptic target cells of NO action and the associated biological function in the CNS are still a matter of controversy. Within the discrete pattern of NO-synthesizing neurons in the brain, NO synthase is specifically colocalized with the cholinergic brain stem-thalamic system, which is thought to regulate the state-dependent activity of the thalamocortical circuit. Here we report evidence indicating that the release of NO onto thalamocortical neurons results in an alteration in voltage dependence of the hyperpolarization-activated cation conductance, probably mediated via the cGMP system. NO selectively dampens oscillatory neuronal activity, indicating a rapidly diffusing signaling mechanism that controls the functional state of the thalamocortical network.