Aims Vagal nerve stimulation (VNS) protects from myocardial and vascular injury following myocardial ischaemia and reperfusion (IR) via a mechanism involving activation of alpha‐7 nicotinic acetylcholine receptor (α7 nAChR) and reduced inflammation. Arginase is involved in development of myocardial IR injury driven by inflammatory mediators. The aim of the study was to clarify whether VNS downregulates myocardial and vascular arginase via a mechanism involving activation of α7 nAChR following myocardial IR. Methods Anaesthetized rats were randomized to (i) sham‐operated, (ii) control IR (30‐min ischaemia and 2‐h reperfusion, (iii) VNS throughout IR, (iv) the arginase inhibitor nor‐NOHA+IR, (v) nor‐NOHA+VNS+IR, (vi) selective α7 nAChR blockade by methyllycaconitine (MLA) followed by VNS throughout IR and (vii) MLA+IR. Results Infarct size was reduced by VNS compared to control IR (41 ± 3% vs. 67 ± 2% of the myocardium at risk, P < 0.001). Myocardial IR increased myocardial and aortic arginase activity 1.7‐ and 3.1‐fold respectively (P < 0.05). VNS attenuated the increase in arginase activity compared to control IR both in the myocardium and aorta (P < 0.05). MLA partially abolished the cardioprotective effect of VNS and completely abrogated the effect of VNS on arginase activity. Arginase inhibition combined with VNS did not further reduce infarct size. Conclusion Vagal nerve stimulation reduced infarct size and reversed the upregulation of arginase induced by IR both in the myocardium and aorta via a mechanism depending on α7 nAChR activation. The data suggest that the cardioprotective effect of VNS is mediated via reduction in arginase activity.