GABA(A) receptors are critical mediators of fast synaptic inhibition in the brain, and the predominant receptor subtype in the central nervous system is believed to be a pentamer composed of alpha, beta, and gamma subunits. Previous studies on recombinant receptors have shown that protein kinase C (PKC) and PKA directly phosphorylate intracellular serine residues within the receptor beta subunit and modulate receptor function. However, the relevance of this regulation for neuronal receptors remains poorly characterized. To address this critical issue, we have studied phosphorylation and functional modulation of GABA(A) receptors in cultured cortical neurons. Here we show that the neuronal beta3 subunit is basally phosphorylated on serine residues by a PKC-dependent pathway. PKC inhibitors abolish basal phosphorylation, increasing receptor activity, whereas activators of PKC enhance beta3 phosphorylation with a concomitant decrease in receptor activity. PKA activators were shown to increase the phosphorylation of the beta3 subunit only in the presence of PKC inhibitors. We also show that the main sites of phosphorylation within the neuronal beta3 subunit are likely to include Ser-408 and Ser-409, residues that are important for the functional modulation of beta3-containing recombinant receptors. Furthermore, PKC activation did not change the total number of GABA(A) receptors in the plasma membrane, suggesting that the effects of PKC activation are on the gating or conductance of the channel. Together, these results illustrate that cell-signaling pathways that activate PKC may have profound effects on the efficacy of synaptic inhibition by directly modulating GABA(A) receptor function.