The development of a balance between excitatory and inhibitory synapses is a critical process in the generation and maturation of functional circuits. Accumulating evidence suggests that neuronal activity plays an important role in achieving such a balance in the developing cortex, but the mechanism that regulates this process is unknown. During development, GABA, the primary inhibitory neurotransmitter in adults, excites neurons as a result of high expression of the Na(+)-K(+)-2Cl(-) cotransporter (NKCC1). Using NKCC1 RNA interference knockdown in vivo, we show that GABA-induced depolarization is necessary for proper excitatory synapse formation and dendritic development of newborn cortical neurons. Blocking NKCC1 with the diuretic bumetanide during development leads to similar persistent changes in cortical circuitry in the adult. Interestingly, expression of a voltage-independent NMDA receptor rescues the failure of NKCC1 knockdown neurons to develop excitatory AMPA transmission, indicating that GABA depolarization cooperates with NMDA receptor activation to regulate excitatory synapse formation. Our study identifies an essential role for GABA in the synaptic integration of newborn cortical neurons and suggests an activity-dependent mechanism for achieving the balance between excitation and inhibition in the developing cortex.