Pyramidal cells form excitatory synaptic connections with local inhibitory neurons in the hippocampus. This recurrent synapse plays a crucial stabilizing role in the control of hippocampal activity, since it transforms pyramidal cell activity into inhibition of the same pyramidal cell population. Using a combination of dual recording from presynaptic and postsynaptic cells and anatomical techniques, we show that these synaptic connections often comprise a single site for liberation of excitatory transmitter. The resulting excitatory postsynaptic potentials (EPSCs) have a fast time course and a similar amplitude to miniature EPSCs recorded in tetrodotoxin and cobalt. In contrast, activation of metabotropic glutamate receptors (mGluRs) by transmitter liberated during repetitive activation of these synapses produces an excitation with a much slower time course. In addition to somatodendritic mGluRs, which excite inhibitory cells, a different species of mGluR is present on inhibitory cell terminals. This mGluR is activated by higher concentrations of the agonist t-1-amino-cyclopentyl-1,3-decarboxylate and acts to reduce gamma-aminobutyric acid release. mGluRs, thus, have a dual action to enhance and to depress synaptic inhibition in the hippocampus.