Nitric oxide (NO) is involved in organ development, synaptogenesis, and response to hypoxia in Drosophila. We cloned and analyzed the only gene in the fly genome that encodes Drosophila nitric-oxide synthase (dNOS). It consists of 19 exons and is dispersed over 34 kilobases of genomic DNA. Alternative transcription start sites and alternative splice sites are used to generate a remarkable variety of mRNAs from the dNOS gene. We identified eight new transcripts that are widely expressed throughout Drosophila development and encode a family of DNOS-related proteins. Alternative splicing affects both the 5'-untranslated region and the coding region of the dNOS primary transcript. Most of the splicing alterations in the coding region of the gene lead to premature termination of the open reading frame. As a result, none of the alternative transcripts encode an enzymatically active protein. However, some of these shorter DNOS protein products can effectively inhibit enzymatic activity of the full-length DNOS1 protein when co-expressed in mammalian cells, thus acting as dominant negative regulators of NO synthesis. Using immunoprecipitation, we demonstrate that these short DNOS protein isoforms can form heterodimers with DNOS1, pointing to a physical basis for the dominant negative effect. Our results suggest a novel regulatory function for the family of proteins encoded by the Drosophila NOS gene.