The role of cAMP in the pulmonary vasculature during the transition from intrauterine to extrauterine life is poorly understood. We hypothesized that cAMP levels are regulated by alterations in phosphodiesterase 3 (PDE3), which hydrolyzes cAMP. PDE3 protein expression and hydrolytic activity were increased in the resistance pulmonary arteries (PA) from spontaneously breathing 1-d-old (1dSB) lambs relative to equivalent-gestation fetuses. This was accompanied by a decrease in steady-state cAMP. Ventilation with 21% O2 and 100% O2 for 24 h disrupted the normal transition, whereas ventilation with 100% O2 + inhaled NO (iNO) for 24 h restored both PDE3 activity and cAMP to 1dSB levels. Consistent with these findings, relaxation to milrinone, a PDE3 inhibitor, was greater in the PA isolated from 1dSB and 100% O2 + iNO lambs, relative to fetal, 21% O2, and 100% O2 lambs. In conclusion, PDE3 expression and activity in the PA dramatically increase after birth, with a concomitant decrease in steady-state cAMP. Ventilation with either 21% O2 or 100% O2 blunts this PDE3 increase, whereas iNO restores PDE3 activity to levels equivalent to 1dSB lambs. The vasodilatory effects of milrinone were most pronounced in vessels from lambs with the highest PDE3 activity, i.e., 1dSB and 100% O2 + iNO lambs. Thus, milrinone may be most beneficial when used in conjunction with iNO.