Intra-arterially administered substance P inhibited neurally activated contractions of the circular muscle of canine small intestine in vivo (lowest effective dose approximately 10(-13) mol). Excitation of intestine required higher (10(-10) mol) doses. The inhibitory effect required functioning nerves, since tetrodotoxin treatment eliminated it. However, inhibition of neurogenic contraction by substance P was unaffected by nicotinic or opiate receptor antagonists or by catecholamine depletion but was reduced by a selective substance P antagonist. Since the inhibition by substance P was also greatly reduced by treatment with atropine or pirenzepine and acetylcholine given intra-arterially produced a similar inhibitory response, stimulation of release of acetylcholine to inhibitory muscarinic receptors on nerves appeared to be the mechanism of this action. Direct smooth muscle effects were ruled out; substance P did not inhibit contractions to intra-arterial acetylcholine or those following tetrodotoxin. In vitro in ileal strips, no inhibition by substance P of any contractile response was found. We propose that the local release of substance P into the myenteric plexus produces inhibition and suggest that this constitutes a physiological function of the neuropeptide. This action may be absent in vitro.