Stress facilitates the development of psychiatric disorders in vulnerable individuals. It affects physiological functions of hippocampal excitatory neurons, but little is known about the impact of stress on the GABAergic network. Here, we studied the effects of stress and a synthetic glucocorticoid on hippocampal GABAergic neurotransmission and network function focusing on two perisomatic interneurons, the parvalbumin (PV)- and the cholecystokinin (CCK)-positive neurons. In acute hippocampal slices of rat, application of the potent glucocorticoid receptor (GR) agonist dexamethasone (DEX) caused a rapid increase in spontaneous inhibitory postsynaptic currents (sIPSCs) in CA1 pyramidal neurons. This effect was mediated by a nongenomic GR that evoked nitric oxide (NO) release from pyramidal neurons. Retrograde NO signaling caused the augmentation of GABA release from the interneurons and increased CCK release, which in turn further enhanced the activity of the PV-positive cells. Interestingly, chronic restraint stress also resulted in increased sIPSCs in CA1 pyramidal neurons that were Ca(2+)-dependent and an additional DEX application elicited no further effect. Concomitantly, chronic stress reduced the number of PV-immunoreactive cells and impaired rhythmic sIPSCs originating from the PV-positive neurons. In contrast, the CCK-positive neurons remained unaffected. We therefore propose that, in addition to the immediate effect, the sustained activation of nongenomic GRs during chronic stress injures the PV neuron network and results in an imbalance in perisomatic inhibition mediated by the PV and CCK interneurons. This stress-induced dysfunctional inhibitory network may in turn impair rhythmic oscillations and thus lead to cognitive deficits that are common in stress-related psychiatric disorders.