Estradiol has numerous physiological and pathophysiological effects on the cardiovascular system, and the ongoing controversy surrounding estrogen replacement therapy clearly illustrates the importance of understanding the molecular mechanisms of estrogen action. Many recent mechanistic studies have focused on the ability of estradiol to stimulate endothelial nitric oxide synthase (eNOS) and the subsequent generation of nitric oxide (NO). NO is centrally involved in many processes such as mitogenesis, cell adhesion, thrombosis, atherosclerosis and hypertension. Consequently, elucidating the mechanisms whereby estradiol influences NO production will directly impact on our understanding of the advantages and disadvantages of estrogen replacement therapy. An exciting aspect of this emerging area of study is that the estrogen, NO and caveolae research fields have merged to identify a novel and clinically relevant molecular process. The goal of this review is to highlight the recent findings in this area and to point out areas of controversy and areas where more studies are needed.