Neuroactive steroid modulation of GABAA receptors was investigated in the peptidergic nerve terminals of the posterior pituitary using patch clamp techniques. In common with GABAA receptors in cell bodies, the nerve terminal GABAA receptor was potentiated by the synthetic steroid alphaxalone and by physiological concentrations of the progesterone metabolite allopregnanolone. Both of these agents enhanced Cl- currents elicited by GABA. Estradiol-17 beta had a weak inhibitory effect on GABA responses of nerve terminals, but only at high concentrations. The potentiating action was manifest as an increase in the probability of channel opening, with no effect on the rate of desensitization of the GABAA receptor. Neuroactive steroids enhanced GABA-gated Cl- channel activity in cell-free membrane patches, thus demonstrating a membrane delimited response. These results indicated that with regard to allosteric modulation by neuroactive steroids, the nerve terminal GABAA receptor is similar to the GABAA receptors of nerve cell bodies and endocrine cells. Neuroactive steroids are thus capable of altering the chemosensitivity of nerve terminal membranes by enhancing GABA inhibition at this location. The neuroactive steroid sensitivity of nerve terminal GABAA receptors provides a pathway by which gonadal steroid derivatives could regulate peptide secretion from neurosecretory neurons. Such a pathway could participate in the coordination of neuropeptide secretion during complex neuroendocrine functions. With specific regard to the neurohypophysis, neuroactive steroid-induced changes in the sensitivity of nerve terminal GABAA receptors could play a role in the initiation of oxytocin secretion during the transition between pregnancy and parturition.