Substance P is thought to play an essential role in several forms of supraspinally mediated analgesia. The actions of substance P on synaptic transmission within descending analgesic pathways, however, are largely unknown. Here, we used whole-cell recordings from rat midbrain slices to examine the effects of substance P on GABAergic and glutamatergic transmission within the periaqueductal gray (PAG), a key component of a descending analgesic pathway that projects via the rostral ventromedial medulla (RVM) to the spinal cord dorsal horn. We found that substance P reversibly decreased the amplitude and increased the paired-pulse ratio of evoked IPSCs recorded from identified PAG-RVM projection neurons and from unidentified PAG neurons. Substance P had no effect on miniature IPSCs, implying an indirect mode of action. The effects of substance P were abolished by metabotropic glutamate type 5 and cannabinoid CB1 receptor antagonists, but unaltered by NMDA, GABA(B), mu,delta-opioid, adenosine A(1), and 5HT(1A) receptor antagonists. Consistent with a role for endogenous glutamate in this process, substance P increased the frequency of action potential-dependent spontaneous EPSCs. Moreover, the effect of substance P on evoked IPSCs was mimicked and occluded by a glutamate transport inhibitor. Finally, these effects were dependent on postsynaptic G-protein activation and diacylglycerol lipase activity, suggesting the requirement for retrograde signaling by the endocannabinoid 2-arachidonoylglycerol. Thus, substance P may facilitate descending analgesia in part by enhancing glutamate-mediated excitation and endocannabinoid-mediated disinhibition of PAG-RVM projection neurons.