We studied the distribution and light- and electron-microscopic morphology of neurons in the hippocampal formation containing nitric oxide synthase (NOS), and thus likely to release nitric oxide, a freely diffusible neuromediator implicated in long-term potentiation. Only a small fraction of hippocampal neurons contained NOS or its marker, NADPH diaphorase. Most of the positive neurons were in the pyramidal layer of the subiculum, stratum radiatum of Ammon's horn, and subgranular zone of the dentate gyrus. Positive neurons were also conspicuous in the molecular layer of the dentate gyrus and in the pyramidal layer of CA3, sparse in the pyramidal layer of CA2 and CA1, and almost absent from presubiculum and parasubiculum. Numerous positive fibers were seen, especially in stratum radiatum and stratum lacunosum-moleculare of Ammon's horn. Double staining experiments demonstrated that nearly all NADPH diaphorase-positive neurons in the hippocampus also contained gamma-aminobutyric acid. On the basis of their morphology, distribution, and inhibitory neurotransmitter content, most NOS-positive cells in the hippocampus are probably local circuit neurons. These data suggest that nitric oxide in CA1 may function as a paracrine agent, rather than a spatially precise messenger, in long-term potentiation.