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Proliferation of neural precursors in the optic lobe of Manduca sexta is controlled by circulating steroids and by local production of nitric oxide (NO). Diaphorase staining, anti-NO synthase (NOS) immunocytochemistry and the NO-indicator, DAF-2, show that cells throughout the optic anlage contain NOS and produce NO. Signaling via NO inhibits proliferation in the anlage. When exposed to low levels of ecdysteroid, NO production is stimulated and proliferation ceases. When steroid levels are increased, NO production begins to decrease within 15 minutes independent of RNA or protein synthesis and cells rapidly resume proliferation. Resumption of proliferation is not due simply to the removal of NO repression though, but also requires an ecdysteroid stimulatory pathway. The consequence of these opposing pathways is a sharpening of the responsiveness to the steroid, thereby facilitating a tight coordination between development of the different elements of the adult visual system.