Reactive oxygen species (ROS) constitute important signaling molecules in the central nervous system. They regulate a number of different functions both under physiological conditions and under pathological conditions. Here we tested the hypothesis that in the immature hippocampus ATP, the most diffuse neurotransmitter in the brain, modulates synaptic transmission via ROS. We show that ATP, acting on metabotropic P2Y1 receptors, increased the frequency of GABA(A)-mediated spontaneous postsynaptic currents (SPSCs) in CA3 principal cells, an effect that was prevented by the antioxidant N-acetyl-cysteine or by catalase, an enzyme that breaks down H2O2. The effect of ATP on SPSCs was mimicked by H2O2 or by the pro-oxidant, Fe2+, which, through the Fentol reaction, catalyzes the conversion of H2O2 into highly reactive hydroxyl radicals. MRS-2179, a P2Y1 receptor antagonist, removed the facilitatory action of Fe2+ on SPSCs, suggesting that endogenous ATP acting on P2Y1 receptors is involved in Fe2+-induced modulation of synaptic transmission. Imaging ROS with the H2O2-sensitive dye DCF revealed that ATP induces generation of peroxide in astrocytes via activation of P2Y1 receptors coupled to intracellular calcium rise. Neither N-acetyl-cysteine nor catalase prevented Ca2+ transients induced by ATP in astrocytes. Since a single hippocampal astrocyte can contact many neurons, ATP-induced ROS signaling may control thousands of synapses. This may be crucial for information processing in the immature brain when GABAergic activity is essential for the proper wiring of the hippocampal network.