A diversity of GABAergic cell types exist within each brain area, and each cell type is thought to play a unique role in the modulation of principal cell output. Basket cells, whose axon terminals surround principal cell somata and proximal dendrites, have a privileged and influential position for regulating the firing of principal cells. This review explores the dichotomy of the two basket cell classes, cholecystokinin- (CCK) and parvalbumin (PV)-containing basket cells, beginning with differences at the level of the individual cell and subsequently focusing on two ways in which this intrinsic dichotomy is enhanced by extrinsic factors. Neuromodulatory influences, exemplified by the effects of the peptide CCK, dynamically enhance the differential functions of the two cell types. Specifications at the level of the postsynaptic principal cell, including input-specific differences in chloride handling and differences in long-range projection patterns of the principal cell targets, also enhance the distinct network function of basket cells. In this review, new findings will be highlighted concerning the roles of neuromodulatory control and postsynaptic long-range projection pattern in the definition of basket cell function.