Previous studies support a model in which the physiological O2 gradient is transduced by haemoglobin into the coordinate release from red blood cells of O2 and nitric oxide (NO)-derived vasoactivity to optimize oxygen delivery in the arterial periphery. But whereas both O2 and NO diffuse into red blood cells, only O2 can diffuse out. Thus, for the dilation of blood vessels by red blood cells, there must be a mechanism to export NO-related vasoactivity, and current models of NO-mediated intercellular communication should be revised. Here we show that in human erythrocytes haemoglobin-derived S-nitrosothiol (SNO), generated from imported NO, is associated predominantly with the red blood cell membrane, and principally with cysteine residues in the haemoglobin-binding cytoplasmic domain of the anion exchanger AE1. Interaction with AE1 promotes the deoxygenated structure in SNO-haemoglobin, which subserves NO group transfer to the membrane. Furthermore, we show that vasodilatory activity is released from this membrane precinct by deoxygenation. Thus, the oxygen-regulated cellular mechanism that couples the synthesis and export of haemoglobin-derived NO bioactivity operates, at least in part, through formation of AE1-SNO at the membrane-cytosol interface.