Although taurine and glutamate are the most abundant amino acids conducting neural signals in the central nervous system, the communication between these two neurotransmitters is largely unknown. This study explores the interaction of taurine and glutamate in the retinal third-order neurons. Using specific antibodies, both taurine and taurine transporters were localized in photoreceptors and Off-bipolar cells, glutamatergic neurons in retinas. It is possible that Off-bipolar cells release juxtaposed glutamate and taurine to activate the third-order neurons in retina. The interaction of taurine and glutamate was studied in acutely dissociated third-order neurons in whole-cell patch-clamp recording and Ca2+ imaging. We find that taurine effectively reduces glutamate-induced Ca2+ influx via ionotropic glutamate receptors and voltage-dependent Ca2+ channels in the neurons, and the effect of taurine was selectively inhibited by strychnine and picrotoxin, but not GABA receptor antagonists, although GABA receptors are present in the neurons. A CaMKII inhibitor partially reversed the effect of taurine, suggesting that a Ca2+/calmodulin-dependent pathway is involved in taurine regulation. On the other hand, a rapid influx of Ca2+ through ionotropic glutamate receptors could inhibit the amplitude and kinetics of taurine-elicited currents in the third-order neurons, which could be controlled with intracellular application of BAPTA a fast Ca2+ chelator. This study indicates that taurine is a potential neuromodulator in glutamate transmission. The reciprocal inhibition between taurine and glutamate in the postsynaptic neurons contributes to computation of visual signals in the retinal neurons.