Electrophysiological data from guinea pig hippocampal slices together with available morphological information about the dentate granule cell--hilar neuron circuitry strongly suggest that hilar neurons largely contribute to postsynaptic inhibition of granule cells. As in hippocampal pyramidal cells, inhibitory postsynaptic potentials in granule cells are either due to an increase in Cl-conductance or to an increase in K-conductance. It is therefore further suggested that hilar neurons inhibiting granule cells belong to at least two functionally distinct groups, those generating Cl-dependent and those generating K-dependent IPSPs. The presumed inhibitory action of hilar neurons is underlined by experiments applying pharmacological tools to suppress or enhance hilar neuron activity. Hyperpolarization of hilar neurons by the presumed GABAB-agonist (-)baclofen is associated with disinhibition of granule cells. If hilar neurons are activated by 4-amino-pyridine or picrotoxin to discharge in repetitive bursts, granule cells display repetitively occurring inhibitory postsynaptic potentials.