Opioid inhibition of presynaptic GABA release in the ventrolateral periaqueductal gray (vlPAG) activates the descending antinociception pathway. Tolerance to repeated opioid administration is associated with upregulation of adenylyl cyclase activity. The objective of these studies was to test the hypothesis that adenylyl cyclase contributes to opioid tolerance by modulating GABA neurotransmission. Repeated microinjections of morphine or the adenylyl cyclase activator NKH477 into the vlPAG decreased morphine antinociception as would be expected with the development of tolerance. Conversely, microinjection of the adenylyl cyclase inhibitor SQ22536 reversed both the development and expression of morphine tolerance. These behavioral results indicate that morphine tolerance is dependent on adenylyl cyclase activation. Electrophysiological experiments revealed that acute activation of adenylyl cyclase with forskolin increased the frequency of presynaptic GABA release. However, recordings from rats treated with repeated morphine administration did not exhibit increased basal miniature inhibitory postsynaptic current (mIPSC) frequency but showed a decrease in mean amplitude of mIPSCs indicating that repeated morphine administration modulates postsynaptic GABAA receptors without affecting the probability of presynaptic GABA release. SQ22536 reversed this change in mIPSC amplitude and inhibited mIPSC frequency selectively in morphine tolerant rats. Repeated morphine or NKH477 administration also decreased antinociception induced by microinjection of the GABAA receptor antagonist bicuculline, further demonstrating changes in GABA neurotransmission with morphine tolerance. These results show that the upregulation of adenylyl cyclase caused by repeated vlPAG morphine administration produces antinociceptive tolerance by modulating both pre- and postsynaptic GABA neurotransmission.