The purpose of this investigation was to study the effect of the presence of red blood cells (RBCs) in the plasma layer near the arteriole wall on nitric oxide (NO) and oxygen (O2) transport. To this end, we extended a coupled NO and O2 diffusion-reaction model in the arteriole, developed by our group, to include the effect of the presence of RBCs in the plasma layer and the effect of convection. Two blood flow velocity profiles (plug and parabolic) were tested. The average hematocrit in the bloodstream was assumed to be constant in the central core and decreasing to zero in the boundary layer next to the endothelial surface layer. The effect of the presence or absence of RBCs near the endothelium was studied while varying the endothelial surface layer and boundary layer thickness. With RBCs present in the boundary layer, the model predicts that 1) NO decreases significantly in the endothelium and vascular wall; 2) there is a very small increase in endothelial and vascular wall Po2; 3) scavenging of NO by hemoglobin decreases with increasing thickness of the boundary layer; 4) the shape of the velocity profile influences both NO and Po2 gradients in the bloodstream; and 5) the presence of RBCs in the boundary layer near the endothelium has a much larger effect on NO than on O2 transport.