Recent studies of the hippocampus have suggested that a network of genes is associated with the regulation of the GAD₆₇ (GAD1) expression and may play a role in γ-amino butyric acid (GABA) dysfunction in schizophrenia (SZ) and bipolar disorder (BD). To obtain a more detailed understanding of how GAD₆₇ regulation may result in GABAergic dysfunction, we have developed an in vitro model in which GABA cells are differentiated from the hippocampal precursor cell line, HiB5. Growth factors, such as PDGF, and BDNF, regulate the GABA phenotype by inducing the expression of GAD₆₇ and stimulating the growth of cellular processes, many with growth cones that form appositions with the cell bodies and processes of other GAD₆₇-positive cells. These changes are associated with increased expression of acetylated tubulin, microtubule-associated protein 2 (MAP2) and the post-synaptic density protein 95 (PSD95). The addition of BDNF, together with PDGF, increases the levels of mRNA and protein for GAD₆₇, as well as the high affinity GABA uptake protein, GAT1. These changes are associated with increased concentrations of GABA in the cytoplasm of "differentiated" HiB5 neurons. In the presence of Ca²⁺ and K⁺, newly synthesized GABA is released extracellularly. When the HiB5 cells appear to be fully differentiated, they also express GAD₆₅, parvalbumin and calbindin, and GluR subtypes as well as HDAC1, DAXX, PAX5, Runx2, associated with GAD₆₇ regulation. Overall, these results suggest that the HiB5 cells can differentiate into functionally mature GABA neurons in the presence of gene products that are associated with GAD₆₇ regulation in the adult hippocampus.