Nitric oxide (NO) is endogenously released in the airways, and the fractional concentration of NO in exhaled breath (FeNO) is now recognized as a surrogate marker of eosinophilic airway inflammation that can be measured using a noninvasive technique suitable for young children. Although FeNO levels are affected by several factors, the most important clinical determinants of increased FeNO levels are atopy, asthma, and allergic rhinitis. In addition, air pollution is an environmental determinant of FeNO that may contribute to the high prevalence of allergic disease. In this review, we discuss the mechanism for airway NO production, methods for measuring FeNO, and determinants of FeNO in children, including host and environmental factors such as air pollution. We also discuss the clinical utility of FeNO in children with asthma and allergic rhinitis and further useful directions using FeNO measurement.