Originally ascribed to having only passive roles in the CNS, astrocytes are now known to have an active role in the regulation of synaptic transmission. Neuronal activity can evoke Ca(2+) transients in astrocytes and Ca(2+) transients in astrocytes can evoke changes in neuronal activity. The excitatory neurotransmitter glutamate has been shown to mediate such bi-directional communication between astrocytes and neurons. We demonstrate here that ATP, a primary mediator of intercellular Ca(2+) signaling among astrocytes, also mediates intercellular signaling between astrocytes and neurons in hippocampal cultures. Mechanical stimulation of astrocytes evoked Ca(2+) waves mediated by the release of ATP and activation of P2 receptors. Mechanically evoked Ca(2+) waves led to decreased excitatory glutamatergic synaptic transmission in an ATP-dependent manner. Exogenous application of ATP does not affect post-synaptic glutamatergic responses but decreased pre-synaptic exocytotic events. Finally, we show that astrocytes exhibit spontaneous Ca(2+) oscillations mediated by extracellular ATP and that inhibition of these Ca(2+) responses enhanced excitatory glutamatergic transmission. We therefore conclude that ATP released from astrocytes exerts tonic and activity-dependent down-regulation of synaptic transmission via pre-synaptic mechanisms.