Dilutional hyponatremia due to increased plasma arginine vasopressin (AVP) is associated with liver cirrhosis. However, plasma AVP remains elevated despite progressive hypoosmolality. This study investigated changes to inhibitory control of supraoptic nucleus (SON) AVP neurons during liver cirrhosis. Experiments were conducted with adult male Sprague-Dawley rats. Bile duct ligation was used as a model of chronic liver cirrhosis. An adeno-associated virus containing a construct with an AVP promoter and either green fluorescent protein (GFP) or a ratiometric chloride indicator, ClopHensorN, was bilaterally injected into the SON of rats. After 2 weeks, rats received either BDL or sham surgery, and liver cirrhosis was allowed to develop for 4 weeks. In vitro, loose patch recordings of action potentials were obtained from GFP-labeled and unlabeled SON neurons in response to a brief focal application of the GABAA agonist muscimol (100 μM). Changes to intracellular chloride ([Cl]i) following muscimol application were determined by changes to the fluorescence ratio of ClopHensorN. The contribution of cation chloride cotransporters NKCC1 and KCC2 to changes in intracellular chloride was investigated using their respective antagonists, bumetanide (BU, 10 μM) and VU0240551 (10 μM). Plasma osmolality and hematocrit were measured as a marker of dilutional hyponatremia. The results showed reduced or absent GABAA -mediated inhibition in a greater proportion of AVP neurons from BDL rats as compared to sham rats (100% inhibition in sham vs. 47% in BDL, p = .001). Muscimol application was associated with increased [Cl]i in most cells from BDL as compared to cells from sham rats (χ2  = 30.24, p < .001). NKCC1 contributed to the impaired inhibition observed in BDL rats (p < .001 BDL - BU vs. BDL + BU). The results show that impaired inhibition of SON AVP neurons and increased intracellular chloride contribute to the sustained dilutional hyponatremia in liver cirrhosis.