Drugs that increase GABA levels in the brain reduce cocaine seeking in rodents and humans, suggesting that GABAergic inhibition regulates cocaine-seeking behavior. We previously reported that repeated cocaine exposure in vivo facilitates long-term potentiation by reducing the strength of GABAergic inhibition in dopamine neurons of the ventral tegmental area (VTA). Selective blockade of cocaine-induced reduction of GABAergic inhibition in the VTA might diminish cocaine-induced aberrant synaptic plasticity and addictive behavior. Here, we investigated the mechanism for cocaine-induced reduction of GABAergic inhibition. We show that a pathophysiologically relevant concentration of cocaine enables a normally ineffective stimulus to induce long-term depression (LTD) of IPSCs (I-LTD) in VTA dopamine neurons of midbrain slices. Activation of D2 dopamine receptors and group I metabotropic glutamate receptors and subsequent recruitment of endocannabinoid signaling are required for I-LTD induction. We further demonstrate that in vivo pretreatment with antagonists to these receptors blocks cocaine-induced reduction of GABAergic inhibition and that repeated cocaine exposure in vivo occludes the subsequent induction of I-LTD ex vivo. Together, these results suggest that repeated cocaine exposure reduces the strength of GABAergic inhibition in dopamine neurons by inducing I-LTD-like modification in vivo.