The dorsal lateral geniculate nucleus (dLGN) is essential for the transfer of visual information from the retina to visual cortex, and inhibitory mechanisms can play a critical in regulating such information transfer. Nitric oxide (NO) is an atypical neuromodulator that is released in gaseous form and can alter neural activity without direct synaptic connections. Nitric oxide synthase (NOS), an essential enzyme for NO production, is localized in thalamic inhibitory neurons and cholinergic brainstem neurons that innervate the thalamus, but NO-mediated effects on thalamic inhibitory activity remain unknown. We have investigated NO effects on inhibitory activity in dLGN using an in vitro slice preparation. The NO donor, SNAP, selectively potentiated the frequency, but not amplitude of spontaneous inhibitory postsynaptic currents (sIPSCs) in thalamocortical relay neurons. This increase also persisted in tetrodotoxin (TTX), consistent with an increase in GABA release from presynaptic terminals. The SNAP-mediated actions were attenuated by the NO scavenger, carboxy-PTIO as well as the guanylyl cyclase inhibitor, ODQ. The endogenous NO precursor, L-arginine produced similar actions as SNAP on sIPSC activity, and these L-arginine-mediated actions were attenuated by the NOS inhibitor, L-NMMA acetate. The SNAP-mediated increase in sIPSC activity was observed in both dLGN and ventrobasal thalamic nucleus (VB) neurons. Considering the lack of interneurons in rodent VB, the NO-mediated actions likely involve an increase in the output of axon terminals of thalamic reticular nucleus (TRN) neurons. Our results indicate that NO upregulates thalamic inhibitory activity, and thus, these actions likely influence sensory information transfer through thalamocortical circuits.