Cyclic-nucleotide-gated (CNG) channels in outer segments of vertebrate photoreceptors generate electrical signals in response to changes in cyclic GMP concentration during phototransduction. CNG channels also allow the influx of Ca2+, which is essential for photoreceptor adaptation. In cone photoreceptors, cGMP triggers an increase in membrane capacitance indicative of exocytosis, suggesting that CNG channels are also involved in synaptic function. Here we examine whether CNG channels reside in cone terminals and whether they regulate neurotransmitter release, specifically in response to nitric oxide (NO), a retrograde transmitter that increases cGMP synthesis and potentiates synaptic transmission in the brain. Using intact retina, we show that endogenous NO modulates synapses between cones and horizontal cells. In experiments on isolated cones, we show directly that CNG channels occur in clusters and are indirectly activated by S-nitrosocysteine (SNC), an NO donor. Furthermore, both SNC and pCPT-cGMP, a membrane-permeant analogue of cGMP, trigger the release of transmitter from the cone terminals. The NO-induced transmitter release is suppressed by guanylate cyclase inhibitors and prevented by direct activation of CNG channels, indicating that their activation is required for NO to elicit release. These results expand our view of CNG channel function to include the regulation of synaptic transmission and mediation of the presynaptic effects of NO.