Melatonin is involved in regulation of a variety of physiological functions through activation of specific G-protein coupled receptors. However, the neuromodulatory role of melatonin, released from photoreceptors in the retina, is poorly understood. Here we show that melatonin enhances the sensitivity of the rod signal pathway by potentiating signal transfer from rod photoreceptors to ON bipolar cells (Rod-ON-BCs). Whole-cell patch-clamp recordings showed that melatonin induced a sustained inward current from Rod-ON-BCs, through activation of the melatonin MT2 receptor, which was identified as one mediated by a cGMP-dependent cation channel. Consistent with this, melatonin was found, using immunocytochemistry, to increase intracellular cGMP levels, which was identified due to an inhibition of phosphodiesterase. Physiologically, melatonin potentiated responses of Rod-ON-BCs to simulated light flashes (brief puffs of CPPG, an mGluR6 antagonist, in the presence of l-AP4, an mGluR6 agonist), which was mediated by cGMP-dependent kinase, and increased the amplitude of the scotopic electroretinographic b-wave, a reflection of Rod-ON-BC activity. These results suggest that melatonin, being at a higher level at night, may improve the signal/noise ratio for rod signals in the outer retina by enhancing signal transfer from rods to BCs.