Estrogen influences brain-derived neurotrophic factor (BDNF) expression in the neocortex. However, BDNF-producing cortical neurons do not express detectable levels of nuclear estrogen receptors; instead, the most abundant cortical nuclear estrogen receptor, ER-β, is present in GABAergic neurons, prompting us to test the hypothesis that estrogen effects on BDNF are mediated via cortical inhibitory interneurons. Adult female ovariectomized rats were provided acute estrogen replacement and the number of cortical GABA, ER-β, and ER-β/GABA double-labeled neurons was examined. Within 48 hours of injection of 17-β-estradiol, the number of perirhinal neurons double-labeled for ER-β/GABA was reduced by 28% (P < 0.01 compared to vehicle-treated ovariectomized controls), and all cells expressing detectable levels of GABA were reduced by 19% (P < 0.01). To investigate potential relationships between estrogen receptors, GABAergic neurons, and BDNF-expressing cells, brain sections were double- or triple-labeled for ER-β, GABAergic, and BDNF immunomarkers. The findings indicated that ER-β-bearing inhibitory neurons project onto other GABAergic neurons that lack nuclear estrogen receptors; these inhibitory neurons in turn innervate BDNF-expressing excitatory cells. High estrogen states reduce cortical GABA levels, presumably releasing inhibition on BDNF-expressing neurons. This identifies a putative two-step transsynaptic mechanism whereby estrogen availability modulates expression of inhibitory transmitters, resulting in increased BDNF expression. J. Comp. Neurol. 499:603–612, 2006. © 2006 Wiley-Liss, Inc.