Considerable evidence indicates that NO biology involves a family of NO-related molecules and that S-nitrosothiols (SNOs) are central to signal transduction and host defence. It is unknown, however, how cells switch off the signals or protect themselves from the SNOs produced for defence purposes. Here we have purified a single activity from Escherichia coli, Saccharomyces cerevisiae and mouse macrophages that metabolizes S-nitrosoglutathione (GSNO), and show that it is the glutathione-dependent formaldehyde dehydrogenase. Although the enzyme is highly specific for GSNO, it controls intracellular levels of both GSNO and S-nitrosylated proteins. Such 'GSNO reductase' activity is widely distributed in mammals. Deleting the reductase gene in yeast and mice abolishes the GSNO-consuming activity, and increases the cellular quantity of both GSNO and protein SNO. Furthermore, mutant yeast cells show increased susceptibility to a nitrosative challenge, whereas their resistance to oxidative stress is unimpaired. We conclude that GSNO reductase is evolutionarily conserved from bacteria to humans, is critical for SNO homeostasis, and protects against nitrosative stress.