Endothelial nitric oxide synthase (eNOS) is dually acylated by N-myristoylation and cysteine palmitoylation and resides in Golgi and caveolae membranes. N-Myristoylation is necessary for its membrane association and targeting into the Golgi complex of transfected cells whereas palmitoylation influences the targeting of eNOS into caveolae. However, the in vivo significance of palmitoylation, membrane association, and the corresponding caveolar localization of eNOS have not been shown. To further examine the nature of membrane association of palmitoylation-deficient forms of eNOS and to address the functional role(s) of palmitoylation in activation of eNOS in vivo, HEk 293 cells stably transfected with wild-type (WT) or palmitoylation-deficient mutants of eNOS were generated. Membrane association of the mutants was biochemically similar to that of the WT protein in terms of their resistance to high salt, high pH, and distribution between Triton X-114 detergent and aqueous phases, suggesting that other hydrophobic factor (s) in eNOS most likely contribute to its membrane association. Most importantly, palmitoylation-deficient mutants of eNOS released less NO from the cells than did WT enzyme, suggesting that palmitoylation plays an important role in determining the optimal release of NO from intact cells. The diminished release of NO from the palmitoylation-deficient mutants was not attributable to alterations in its catalytic properties as the purified mutant and WT enzymes were kinetically identical. Since palmitoylation is necessary for localization of eNOS in caveolae, our data suggest that such localization could regulate the frequency and magnitude of NO release in response to stimuli in vivo.