The excitability of cortical circuits is modulated by interneurons that release the inhibitory neurotransmitter GABA. In primate and rodent visual cortex, activity deprivation leads to a decrease in the expression of GABA. This suggests that activity is able to adjust the strength of cortical inhibition, but this has not been demonstrated directly. In addition, the nature of the signal linking activity to GABA expression has not been determined. Activity is known to regulate the expression of the neurotrophin brain-derived neurotrophic factor (BDNF), and BDNF has been shown to influence the phenotype of GABAergic interneurons. We use a culture system from postnatal rat visual cortex to test the hypothesis that activity is regulating the strength of cortical inhibition through the regulation of BDNF. Cultures were double-labeled against GABA and the neuronal marker MAP2, and the percentage of neurons that were GABA-positive was determined. Blocking spontaneous activity in these cultures reversibly decreased the number of GABA-positive neurons without affecting neuronal survival. Voltage-clamp analysis of inhibitory currents demonstrated that activity blockade also decreased GABA-mediated inhibition onto pyramidal neurons and raised pyramidal neuron firing rates. All of these effects were prevented by incubation with BDNF during activity blockade, but not by neurotrophin 3 or nerve growth factor. Additionally, blockade of neurotrophin signaling mimicked the effects of activity blockade on GABA expression. These data suggest that activity regulates cortical inhibition through a BDNF-dependent mechanism and that this neurotrophin plays an important role in the control of cortical excitability.