The vestibulo-ocular reflex (VOR) produces compensatory eye movements by utilizing head rotational velocity signals from the semicircular canals to control contractions of the extraocular muscles. In mammals, the time course of horizontal VOR is longer than that of the canal signals driving it, revealing the presence of a central integrator known as velocity storage. Although the neurons mediating VOR have been described neurophysiologically, their properties, and the mechanism of velocity storage itself, remain unexplained. Recent models of integration in VOR are based on systems of linear elements, interconnected in arbitrary ways. The present study extends this work by modeling horizontal VOR as a learning network composed of nonlinear model neurons. Network architectures are based on the VOR arc (canal afferents, vestibular nucleus (VN) neurons and extraocular motoneurons) and have both forward and lateral connections. The networks learn to produce velocity storage integration by forming lateral (commissural) inhibitory feedback loops between VN neurons. These loops overlap and interact in a complex way, forming both fast and slow VN pathways. The networks exhibit some of the nonlinear properties of the actual VOR, such as dependency of decay rate and phase lag upon input magnitude, and skewing of the response to higher magnitude sinusoidal inputs. Model VN neurons resemble their real counterparts. Both have increased time constant and gain, and decreased spontaneous rate as compared to canal afferents. Also, both model and real VN neurons exhibit rectification and skew. The results suggest that lateral inhibitory interactions produce velocity storage and also determine the properties of neurons mediating VOR. The neural network models demonstrate how commissural inhibition may be organized along the VOR pathway.