Medium conditioned by cultured hippocampal glial contains an inhibitory factor that can hyperpolarize and suppress neuronal activity. Using biochemistry, electrophysiology, pharmacology, and mass spectrometry, we have identified the inhibitory factor as GABA (gamma-aminobutyric acid). Like GABA, the inhibitory factor increases chloride and potassium currents in neurons, which can be blocked by bicuculline. Mass spectrometry analysis of conditioned medium reveals peaks that are identical to that for GABA. Up to 500 micromolar GABA is found in conditioned medium from glial cultures. No GABA is found in conditioned medium from neuronal cultures. Hippocampal glia make much more GABA than cortical glia or glia from other brain regions. It is not clear how hippocampal glia synthesize GABA. Although they express GAD mRNA and adding glutamate to the culture medium increases the amount of GABA produced, other data suggest that glia do not use GAD to make GABA. Identifying the mechanism(s) by which GABA is produced by hippocampal glia would help clarify its role in modulating neuronal activity in the brain.