N-dansylhomocysteine (DnsHCys) is quenched on S-nitrosation. The product of this reaction, N-dansyl-S-nitrosohomocysteine, is a sensitive, direct fluorogenic substrate for the denitrosation activity of protein disulfide isomerase (PDI) with an apparent K_M of 2 μM. S-nitroso-BSA (BSA-NO) competitively inhibited this reaction with an apparent K_I of 1 μM. The oxidized form of DnsHCys, N,N-didansylhomocystine, rapidly accumulated in cells and was reduced to DnsHCys. The fluorescence of DnsHCys-preloaded human umbilical endothelial cells and hamster lung fibroblasts were monitored as a function of extracellular BSA-NO concentration via dynamic fluorescence microscopy. The observed quenching of the DnsHCys fluorescence was an indirect measure of cell surface PDI (csPDI) catalyzed denitrosation of extracellular S-nitrosothiols as decrease or increase in the csPDI levels in HT1080 fibrosarcoma cells correlated with the rate of quenching and the PDI inhibitors, 5,5′-dithio-bis-3-nitrobenzoate and 4-(N-(S-glutathionylacetyl) amino)phenylarsenoxide inhibited quenching. The apparent K_M values for denitrosation of BSA-NO by csPDI ranged from 12 μM to 30 μM. Depletion of membrane N₂O₃ with the lipophylic antioxidant, vitamin E, inhibited csPDI-mediated quenching rates of DnsHCys fluorescence by ≈70%. The K_M for BSA-NO increased by ≈3-fold and V_max decreased by ≈4-fold. These findings suggest that csPDI catalyzed NO released from extracellular S-nitrosothiols accumulates in the membrane where it reacts with O₂ to produce N₂O₃. Intracellular thiols may then be nitrosated by N₂O₃ at the membrane-cytosol interface.