Synaptic transmission can be blocked very efficiently by inhibitory synapses on axon initial segments. Inhibitory chandelier cells forming synapses on the axon initial segment of pyramidal neurons have been found in the neocortex and hippocampus proper. Here we describe an axo-axonic local circuit neuron in the rat fascia dentata that establishes synaptic contacts with axon initial segments of numerous dentate granule cells. Examination of a large number of Golgi-impregnated nongranule cells in the fascia dentata of rats revealed a group of neurons with characteristics of chandelier cells. Thus these cells exhibited an extensive axonal plexus within the granular layer that characteristically formed vertical aggregations of axonal varicosities. The cell bodies of these neurons were located in the inner molecular layer or in the outer part of the granular layer. Their dendrites invaded the molecular layer, suggesting an afferent innervation similar to that of the granule cells. Well impregnated putative axo-axonic cells were gold-toned for an electron microscopic analysis. The cell bodies and dendrites of these neurons exhibited characteristic ultrastructural features of nongranule cells, i.e., large amounts of perinuclear cytoplasm, infoldings of the nuclear membrane, and a large number of synaptic contacts on the perikaryon and on the smooth dendritic shafts. The axon originating from the cell body or from a proximal dendrite gave rise to numerous vesicle-filled varicosities that almost exclusively formed symmetric synaptic contacts with axon initial segments. A semiquantitative study of five axonal complexes demonstrated that 92.3% of identified postsynaptic elements were initial segments of granule cell axons. Immunostaining with antibodies against glutamate decarboxylase (GAD) and parvalbumin (PARV) revealed a subpopulation of neurons that very much resembled the Golgi-impregnated axo-axonic cells with regard to cell body location, dendritic arborization, and fine structural characteristics of perikarya and dendrites. GAD and PARV were found to be coexistent in these cells. Moreover, we found GAD- and PARV-immunoreactive terminals in symmetric synaptic contact with axon initial segments of granule cells. The present study has shown a hitherto unknown axo-axonic cell in the rat fascia dentata. On the basis of our immunocytochemical findings, we hypothesize that this cell exerts a strong inhibitory effect on dentate granule cells. This way, signal transmission from the fascia dentata to the hippocampus proper within the "trisynaptic pathway" can efficiently be controlled by a group of highly specialized neurons.