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Synaptic depression is essential for controlling the balance between excitation and inhibition in cortical networks. Several studies have shown that the depression of intracortical synapses is asymmetric, that is, inhibitory synapses depress less than excitatory ones. Whether this asymmetry has any impact on cortical function is unknown. Here we show that the differential depression of intracortical synapses provides a mechanism through which the gain and sensitivity of cortical circuits shifts over time to improve stimulus coding. We examined the functional consequences of asymmetric synaptic depression by modeling recurrent interactions between orientation-selective neurons in primary visual cortex (V1) that adapt to feedforward inputs. We demonstrate analytically that despite the fact that excitatory synapses depress more than inhibitory synapses, excitatory responses are reduced less than inhibitory ones to increase the overall response gain. These changes play an active role in generating selective gain control in visual cortical circuits. Specifically, asymmetric synaptic depression regulates network selectivity by amplifying responses and sensitivity of V1 neurons to infrequent stimuli and attenuating responses and sensitivity to frequent stimuli, as is indeed observed experimentally.