A core component to corticolimbic circuitry is the GABAergic interneuron. Neuroanatomic studies conducted over the past century have demonstrated several subtypes of interneuron defined by characteristic morphological appearances in Golgi-stained preparations. More recently, both cytochemical and electrophysiological techniques have defined various subtypes of GABA neuron according to synaptic connections, electrophysiological properties and neuropeptide content. These cells provide both inhibitory and disinhibitory modulation of cortical and hippocampal circuits and contribute to the generation of oscillatory rhythms, discriminative information processing and gating of sensory information within the corticolimbic system. All of these functions are abnormal in schizophrenia. Recent postmortem studies have provided consistent evidence that a defect of GABAergic neurotransmission probably plays a role in both schizophrenia and bipolar disorder. Many now believe that such a disturbance may be related to a perturbation of early development, one that may result in a disturbance of cell migration and the formation of normal lamination. The ingrowth of extrinsic afferents, such as the mesocortical dopamine projections, may "trigger" the appearance of a defective GABA system, particularly under stressful conditions when the modulation of the dopamine system is likely to be altered. Based on the regional and subregional distribution of changes in GABA cells in schizophrenia and bipolar disorder, it has been postulated that the basolateral nucleus of the amygdala may contribute to these abnormalities through an increased flow of excitatory activity. By using "partial" modeling, changes in the GABA system remarkably similar to those seen in schizophrenia and bipolar disorder have been induced in rat hippocampus. In the years to come, continued investigations of the GABA system in rodent, primate and human brain and the characterization of changes in specific phenotypic subclasses of interneurons in schizophrenia and bipolar disorder will undoubtedly provide important new insights into how the integration of this transmitter system may be altered in neuropsychiatric disease.