Leishmania parasites, transmitted by phlebotomine sand flies, are obligate intracellular parasites of macrophages. The sand fly Phlebotomus papatasi is the vector of Leishmania major, a causative agent of cutaneous leishmaniasis in the Old World, and its saliva exacerbates parasite proliferation and lesion growth in experimental cutaneous leishmaniasis. Here we show that P. papatasi saliva contains a potent inhibitor of protein phosphatase 1 and protein phosphatase 2A of murine macrophages. We further demonstrate that P. papatasi saliva down regulates expression of the inducible nitric oxide synthase gene and reduces nitric oxide production in murine macrophages. Partial biochemical characterization of the protein phosphatase and nitric oxide inhibitor indicated that it is a small, ethanol-soluble molecule resistant to boiling, proteolysis, and DNase and RNase treatments. We suggest that the P. papatasi salivary protein phosphatase inhibitor interferes with the ability of activated macrophages to transmit signals to the nucleus, thereby preventing up regulation of the induced nitric oxide synthase gene and inhibiting the production of nitric oxide. Since nitric oxide is toxic to intracellular parasites, the salivary protein phosphatase inhibitor may be the mechanism by which P. papatasi saliva exacerbates cutaneous leishmaniasis.