We will let each state in the NFA correspond to a non-terminal in the
grammar. Each symbol used on the transitions corresponds to a
terminal symbol.
Let denote the non-terminal corresponding to state of the NFA. Then
Note that -transitions between states would generate
production rules of the form
, which says
that ``wherever we see we can replace it with '' - another
indication that -transitions denote equivalence.
This process will work equally well with a DFA, and can be applied in
reverse to a regular grammar to produce the corresponding NFA.