Strong perisomatic inhibition by fast-spiking basket cells (FS-BCs) regulates dentate throughput. Homotypic FS-BC interconnections that support gamma oscillations, and heterotypic inputs from diverse groups of interneurons that receive extensive neurochemical regulation, together, shape FS-BC activity patterns. However, whether seizures precipitate functional changes in inhibitory networks and contribute to abnormal network activity in epilepsy is not known. In the first recordings from dentate interneuronal pairs in a model of temporal lobe epilepsy, we demonstrate that status epilepticus (SE) selectively compromises GABA release at synapses from dentate accommodating interneurons (AC-INs) to FS-BCs, while efficacy of homotypic FS-BC synapses is unaltered. The functional decrease in heterotypic cannabinoid receptor type 1 (CB1R)-sensitive inhibition of FS-BCs resulted from enhanced baseline GABAB-mediated suppression of synaptic release after SE. The frequency of CB1R-sensitive inhibitory synaptic events in FS-BCs was depressed early after SE induction and remained reduced in epileptic rats. In biologically based simulations of heterogeneous inhibitory networks and excitatory–inhibitory cell networks, experimentally identified decrease in reliability of AC-IN to FS-BCs synaptic release reduced theta power and theta-gamma coupling and enhanced gamma coherence. Thus, the experimentally identified functional reduction in heterotypic inhibition of FS-BCs can contribute to compromised network oscillations in epilepsy and could precipitate memory and cognitive co-morbidities.