Nongenomic gonadal steroid feedback to oxytocin containing neurons in the supraoptic nucleus of the hypothalamus is mediated via the neurosteroid allopregnanolone (3alpha-OH-DHP) that acts as an allosteric modulator of the postsynaptic GABA(A) receptors. We found evidence to support the idea that neurosteroids not only potentiate GABA(A) receptor function but also prevent its suppression by PKC. In addition, we found that neurosteroid sensitivity of GABA(A) receptor itself is dependent on the balance between endogenous phosphatase and PKC activity and not, as previously suggested, on subunit composition changes of the GABA(A) receptor. These data imply that native GABA(A) receptors are only sensitive to 3alpha-OH-DHP if there is endogenous phosphatase activity. In contrast, when, due to endogenous release of oxytocin in the hypothalamus, the intracellular balance is shifted from high phosphatase activity toward a higher level of PKC-dependent phosphorylation, this leads to 3alpha-OH-DHP-insensitivity of the GABA(A) receptors. How the regulatory mechanisms of the GABA(A) receptor physiology for the hypothalamus may also account for alterations in GABA transmission observed in other brain areas is discussed.