Alterations in network activity trigger compensatory changes in excitation and inhibition that restore neuronal firing rate to an optimal range. One example of such synaptic homeostasis is the downregulation of inhibitory transmission by chronic inactivity, in part, through the reduction of vesicular transmitter content. The enzyme glutamic acid decarboxylase 67 (GAD67) is critical for GABA synthesis, but its involvement in homeostatic plasticity is unclear. We explored the role of GAD67 in activity-dependent synaptic plasticity using a mouse line (Gad1–/–) in which GAD67 expression is disrupted by genomic insertion of the green fluorescent protein (GFP). Homozygous deletion of Gad1 significantly reduced miniature inhibitory postsynaptic current (mIPSC) amplitudes and GABA levels in cultured hippocampal neurons. The fractional block of mIPSC amplitude by a low affinity, competitive GABAA receptor antagonist was higher in GAD67-lacking neurons, suggesting that GABA concentration in the synaptic cleft is lower in knockout animals. Chronic suppression of activity by the application of tetrodotoxin (TTX) reduced mIPSC amplitudes and the levels of GAD67 and GABA. Moreover, TTX reduced GFP levels in interneurons, suggesting that GAD67 gene expression is a key regulatory target of activity. These in vitro experiments were corroborated by in vivo studies in which olfactory deprivation reduced mIPSC amplitudes and GFP levels in glomerular neurons in the olfactory bulb. Importantly, TTX-induced downregulation of mIPSC was attenuated in Gad1–/– neurons. Altogether, these findings indicate that activity-driven expression of GAD67 critically controls GABA synthesis and, thus, vesicular filling of the transmitter.