Inhibition at bipolar cell axon terminals regulates excitatory signaling to ganglion cells and is mediated, in part, by GABAC receptors. We investigated GABAC receptor-mediated inhibition using pharmacological approaches and genetically altered mice that lack GABAC receptors. Responses to applied GABA showed distinct time courses in various bipolar cell classes, attributable to different proportions of GABAA and GABAC receptors. The elimination of GABAC receptors in GABAC null mice reduced and shortened GABA-activated currents and light-evoked inhibitory synaptic currents (L-IPSCs) in rod bipolar cells. ERG measurements and recordings from the optic nerve showed that inner retinal function was altered in GABAC null mice. These data suggest that GABAC receptors determine the time course and extent of inhibition at bipolar cell terminals that, in turn, modulates the magnitude of excitatory transmission from bipolar cells to ganglion cells.