The CXC chemokine receptor 4 (CXCR4) for the chemokine (C-X-C motif) ligand 12/stromal cell-derived factor-1 alpha (CXCL12/SDF-1 alpha) is highly expressed in the postnatal CA1 stratum lacunosum-moleculare. However, both the network events triggered by SDF-1 alpha in this microcircuit and the cellular targets of this chemokine remain virtually unexplored. Here, we have studied SDF-1 alpha-mediated neuromodulation of the stratum lacunosum-moleculare by directly comparing the properties of CXCR4-expressing Cajal-Retzius cells vs. CXCR4-non-expressing interneurons, and by recording the electrophysiological effects caused by application of SDF-1 alpha on either cell type. We demonstrate that SDF-1 alpha dramatically reduces spontaneous firing in Cajal-Retzius cells via hyerpolarization, and that cessation of firing is prevented by the CXCR4-specific antagonist AMD3100. In contrast, no effects on the excitability of interneurons of the same layer were observed following exposure to the chemokine. We also provide evidence that, despite the expression of functional glutamate receptors, Cajal-Retzius cells are integrated in the synaptic network of the stratum lacunosum-moleculare via excitatory GABAergic input. Furthermore, we show that the axons of Cajal-Retzius cells target specifically the stratum lacunosum-moleculare and the dentate gyrus, but lack postsynaptic specializations opposite to their axonal varicosities. These results, taken together with our observation that SDF-1 alpha reduces evoked field responses at the entorhinal cortex-CA1 synapse, suggest that Cajal-Retzius cells produce a diffuse output that may impact information processing of stratum lacunosum-moleculare. We propose that pathological alterations of local levels of SDF-1 alpha or CXCR4 expression may affect the functions of an important hippocampal microcircuit.