Endothelial cells in most vascular beds release a factor that hyperpolarizes the underlying smooth muscle, produces vasodilatation, and plays a fundamental role in the regulation of local blood flow and systemic blood pressure. The identity of this endothelium-derived hyperpolarizing factor (EDHF), which is neither NO nor prostacyclin, remains obscure. Herein, we demonstrate that in mesenteric resistance arteries, release of C-type natriuretic peptide (CNP) accounts for the biological activity of EDHF. Both produce identical smooth muscle hyperpolarizations that are attenuated in the presence of high [K⁺], the G_i G protein (G_i) inhibitor pertussis toxin, the G protein-gated inwardly rectifying K⁺ channel inhibitor tertiapin, and a combination of Ba²⁺ (inwardly rectifying K⁺ channel blocker) plus ouabain (Na⁺/K⁺-ATPase inhibitor). Responses to EDHF and CNP are unaffected by the natriuretic peptide receptor (NPR)-A/B antagonist HS-142-1, but mimicked by the selective NPR-C agonist, cANF^4–23. EDHF-dependent relaxation is concomitant with liberation of endothelial CNP; in the presence of the myoendothelial gap-junction inhibitor 18α-glycyrrhetinic acid or after endothelial denudation, CNP release and EDHF responses are profoundly suppressed. These data demonstrate that acetylcholine-evoked release of endothelial CNP activates NPR-C on vascular smooth muscle that via a G_i coupling promotes Ba²⁺/ouabain-sensitive hyperpolarization. Thus, we have revealed the identity of EDHF and established a pivotal role for endothelial-derived CNP in the regulation of vascular tone and blood flow.