The modulatory action of substance P on synaptic transmission of CA1 neurons was studied using intra- or extracellular recording from the mouse hippocampal slice preparation. Bath-applied substance P (2–4 μm) or the selective NK1 receptor agonist substance P methylester (SPME, 10 nm–5 μm) depressed field potentials (recorded from stratum pyramidale) evoked by focal stimulation of Schaffer collaterals. This effect was apparently mediated via NK1 receptors since it was completely blocked by the selective NK1 antagonist SR 140333. The field potential depression by SPME was significantly reduced in the presence of bicuculline. Intracellular recording from CA1 pyramidal neurons showed that evoked excitatory postsynaptic potentials (EPSPs) and evoked inhibitory postsynaptic potentials (IPSPs) were similarly depressed by SPME, which at the same time increased the frequency of spontaneous GABAergic events and reduced that of spontaneous glutamatergic events. The effects of SPME on spontaneous and evoked IPSPs were prevented by the ionotropic glutamate receptor blocker kynurenic acid. In tetrodotoxin (TTX) solution, no change in either the frequency of spontaneous GABAergic and glutamatergic events or in the amplitude of responses of pyramidal neurons to 4 μmα-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid (AMPA) or 10 μmN-methyl-d-aspartate (NMDA) was observed. On the same cells, SPME produced minimal changes in passive membrane properties unable to account for the main effects on synaptic transmission. The present data indicate that SPME exerted its action on CA1 pyramidal neurons via a complex network mechanism, which is hypothesized to involve facilitation of a subset of GABAergic neurons with widely distributed connections to excitatory and inhibitory cells in the CA1 area.