Gain modulation is a prominent feature of neuronal activity recorded in behaving animals, but the mechanism by which it occurs is unknown. By introducing a barrage of excitatory and inhibitory synaptic conductances that mimics conditions encountered in vivo into pyramidal neurons in slices of rat somatosensory cortex, we show that the gain of a neuronal response to excitatory drive can be modulated by varying the level of "background" synaptic input. Simultaneously increasing both excitatory and inhibitory background firing rates in a balanced manner results in a divisive gain modulation of the neuronal response without appreciable signal-independent increases in firing rate or spike-train variability. These results suggest that, within active cortical circuits, the overall level of synaptic input to a neuron acts as a gain control signal that modulates responsiveness to excitatory drive.