1. The hypothalamic arcuate nucleus (ARC) contains neuroendocrine neurons that regulate endocrine secretions by releasing substances which control anterior pituitary hormonal release into the portal blood stream. Many neuroactive substances have been identified in the ARC, but the existence of excitatory neurons in the ARC and the identity of an excitatory transmitter have not been investigated physiologically. 2. In the present experiments using whole-cell current- and voltage-clamp recording of neurons from cultures and slices of the ARC, we demonstrate for the first time that some of the neurons in the ARC secrete glutamate as their transmitter. 3. Using microdrop stimulation of presynaptic neurons in ARC slices, we found that local axons from these glutamatergic neurons make local synaptic contact with other neurons in the ARC and that all evoked excitatory postsynaptic potentials could be blocked by the selective ionotropic glutamate receptor antagonists 6-cyano-7-nitroquinoxaline-2,3-dione (CNQX; 10 microM) and D,L-2-amino-5-phosphonovalerate (AP5; 100 microM). To determine the identity of ARC neurons postsynaptic to local glutamatergic neurons, we used antidromic stimulation to reveal that many of these cells were neuroendocrine neurons by virtue of their maintaining axon terminals in the median eminence. 4. In ARC cultures, postsynaptic potentials, both excitatory and inhibitory, were virtually eliminated by the glutamate receptor antagonists AP5 and CNQX, underlining the functional importance of glutamate within this part of the neuroendocrine brain. 5. GABA was secreted by a subset of ARC neurons from local axons. The GABAA receptor antagonist bicuculline released glutamatergic neurons from chronic inhibition mediated by synaptically released GABA, resulting in further depolarization and an increase in the amplitude and frequency of glutamate-mediated excitatory postsynaptic potentials.