The critical role of thyroid hormone (TH) in brain development is well-established. Evidence shows that severe deficiencies lead to significant neurological dysfunction. Much less information is available on more modest perturbations of TH on brain function. The present study induced varying degrees of developmental hypothyroidism by administration of low doses of the TH synthesis inhibitor, propylthiouracil (PTU 0, 1, 2, and 3 ppm) to the drinking water of pregnant rats. This regimen produced dose-dependent reductions in circulating levels of T4 in dams and offspring on postnatal days (PN) 15 and 22, with return to control levels in adulthood upon termination of treatment at weaning. Modest reductions in T3 were observed in the high-dose group on PN15. Synaptic function in the dentate gyrus was examined in adult euthyroid offspring using in vivo field potentials. Excitatory synaptic transmission (excitatory postsynaptic potential [EPSP] slope amplitude) was significantly reduced at 2 and 3 ppm PTU, with no statistically reliable effect detected in the population spike. Paired-pulse functions estimating the integrity of inhibitory synaptic processing were modestly reduced by 3 ppm PTU. Long-term potentiation (LTP) of the EPSP slope was impaired at all dose levels. Trace fear conditioning to context and to cue was impaired at the highest dose level when a distractor stimulus was present, whereas conditioning in a standard trace fear paradigm paradoxically revealed “enhanced” performance at the intermediate dose and a return to control values in the high-dose group. Biphasic dose-response profiles were evident in some measures (trace fear conditioning and LTP) but not others and serve to exemplify the complexity of the role of TH in brain development and its consequences for brain function.