1. A theoretical model was developed to investigate action potential propagation in posterior pituitary nerve terminals. This model was then used to evaluate the efficacy of depolarizing and shunting GABA responses on action potential propagation. 2. Experimental data obtained from the posterior pituitary with patch clamp techniques were used to derive empirical expressions for the voltage and time dependence of the nerve terminal Na+ and K+ channels. The essential structure employed here was based on anatomical and cable data from the posterior pituitary, and consisted of a long cylindrical axon (diameter, 0.5 mm) with a large spherical swelling (diameter, 4-21 mm) in the middle. 3. In the absence of an inhibitory conductance, simulated action potentials propagated with high fidelity through the nerve terminal. Swellings could block propagation, but only when sizes exceeded those observed in the posterior pituitary. Adding axonal branches reduced the critical size only slightly. These results suggested that action potentials invade the entire posterior pituitary nerve terminal in the absence of inhibition or depression. 4. The addition of inhibitory conductance to a swelling caused simulated action potentials to fail at the swelling. Depolarizing inhibitory conductances were 1.6 times more effective than shunting inhibitory conductances in blocking propagation. 5. Inhibitory conductances within the range of experimentally observed magnitudes and localized to swellings in the observed range of sizes were too weak to block simulated action potentials. However, twofold enhancement of GABA responses by neurosteroid resulted in currents strong enough to block propagation in realistic swelling sizes. 6. GABA could block simulated propagation without neurosteroid enhancement provided that GABA was present throughout a region in the order of a few hundred micrometres. For this widespread inhibition depolarizing conductance was 2.2 times more effective than shunting conductance. 7. These results imply two modes of propagation block, one resulting from highly localized release of inhibitory transmitter under conditions potentiating GABA responses, and the other resulting from widespread release of GABA in the absence of receptor potentiation. 8. The Na+ channels of the posterior pituitary nerve terminal have a unique voltage dependence that allows small depolarizations to inactivate without causing activation. The voltage dependence of this Na+ channel may serve as a specialized adaptation that facilitates in allowing small depolarizing conductances to block action potential propagation.