Astrocytes, which are increasingly recognized as pivotal constituents of brain circuits governing a wide range of functions, express GABA transporter 3 (Gat3), an astrocyte-specific GABA transporter responsible for maintenance of extra-synaptic GABA levels. Here, we examined the functional role of Gat3 in astrocyte-mediated modulation of neuronal activity and information encoding. First, we developed a multiplexed CRISPR construct applicable for effective genetic ablation of Gat3 in the visual cortex of adult mice. Using in vivo two-photon calcium imaging of visual cortex neurons in Gat3 knockout mice, we observed changes in spontaneous and visually driven single neuronal response properties such as response magnitudes and trial-to-trial variability. Gat3 knockout exerted a pronounced influence on population-level neuronal activity, altering the response dynamics of neuronal populations and impairing their ability to accurately represent stimulus information. These findings demonstrate that Gat3 in astrocytes profoundly shapes the sensory information encoding capacity of neurons and networks within the visual cortex.