The substantia nigra pars compacta and ventral tegmental area contain the two largest populations of dopamine-releasing neurons in the mammalian brain. These neurons extend elaborate projections in the striatum, a large subcortical structure implicated in motor planning and reward-based learning. Phasic activation of dopaminergic neurons in response to salient or reward-predicting stimuli is thought to modulate striatal output through the release of dopamine to promote and reinforce motor action. Here we show that activation of dopamine neurons in striatal slices rapidly inhibits action potential firing in both direct- and indirect-pathway striatal projection neurons through vesicular release of the inhibitory transmitter GABA (γ-aminobutyric acid). GABA is released directly from dopaminergic axons but in a manner that is independent of the vesicular GABA transporter VGAT. Instead, GABA release requires activity of the vesicular monoamine transporter VMAT2, which is the vesicular transporter for dopamine. Furthermore, VMAT2 expression in GABAergic neurons lacking VGAT is sufficient to sustain GABA release. Thus, these findings expand the repertoire of synaptic mechanisms used by dopamine neurons to influence basal ganglia circuits, show a new substrate whose transport is dependent on VMAT2 and demonstrate that GABA can function as a bona fide co-transmitter in monoaminergic neurons.