An abnormal vasodilation is a major defect observed in the arteries of diabetic and hypertensive individuals. Myosin bound phosphatase (MBP) dephosphorylates myosin light chains which play a dominant role in vascular smooth muscle (VSM) contraction. Using two distinct approaches, we have demonstrated that insulin rapidly stimulates MBP and simultaneously inhibits RhoA/Rho kinase signaling via the nitric oxide (NO)/cGMP signaling pathway. Insulin activates MBP by decreasing Thr695 phosphorylation of myosin-bound subunit (MBS) via two different but cross-talking signaling pathways. Firstly, insulin inactivates Rho kinase by blocking RhoA activation and translocation to the membrane fraction via increased cGMP/cGK-1( mediated RhoA phosphorylation and decreased geranylgeranylation. Secondly, insulin induces iNOS expression via PI3-kinase signaling leading to generation of NO/cGMP which activates MBP via cGK-1( mediated inhibition of MBSThr695 phosphorylation via Rho kinase inactivation. MBP activation prevents agonist induced MLC20 phosphorylation as well as VSMC contraction. VSMCs isolated from SHR and diabetic rats exhibit elevations in Rho kinase, which increases MBS Thr695 phosphorylation and inhibits MBP. The defects appear to be at the level of PI3-kinase activation due to impaired insulin-induced IRS-1 tyrosine phosphorylation because of increased association of active Rho kinase with the IRS-1 leading to increased IRS-1 serine phosphorylation, which interrupts with downstream insulin signaling.