Previous studies have revealed a loss of neurons in layer III of the entorhinal cortex (EC) in patients with temporal lobe epilepsy. These neurons project to the hippocampus and may activate inhibitory interneurons, so that their loss could disrupt inhibitory function in the hippocampus. The present study evaluates this hypothesis in a rat model in which layer III neurons were selectively destroyed by focal injections of the indirect excitotoxin, aminooxyacetic acid (AOAA). Inhibitory function in the hippocampus was assessed by evaluating the discharge of CA1 neurons in response to stimulation of afferent pathways in vivo. In control animals, stimulation of the temporo-ammonic pathway leads to heterosynaptic inhibition of population spikes generated by subsequent stimulation of the commissural projection to CA1. This heterosynaptic inhibition was substantially reduced in animals that had received AOAA injections 1 mo previously. Stimulation of the commissural projection also elicited multiple population spikes in CA1 in AOAA-injected animals, and homosynaptic inhibition in response to paired-pulse stimulation of the commissural projection was dramatically diminished. These results suggest a disruption of inhibitory function in CA1 in AOAA-injected animals. To determine whether the disruption of inhibition occurred selectively in CA1, we assessed paired-pulse inhibition in the dentate gyrus. Both homosynaptic inhibition generated by paired-pulse stimulation of the perforant path, and heterosynaptic inhibition produced by activation of the commissural projection to the dentate gyrus appeared largely comparable in AOAA-injected and control animals; thus abnormalities in inhibitory function following AOAA injections occurred relatively selectively in CA1. Electrolytic lesions of the EC did not cause the same loss of inhibition as seen in animals with AOAA injections, indicating that the loss of inhibition in CA1 is not due to the loss of excitatory driving of inhibitory interneurons. Also, electrolytic lesions of the EC in animals that had been injected previously with AOAA had little effect on the abnormal physiological responses in CA1, suggesting that most alterations in inhibition in CA1 are not due to circuit abnormalities within the EC. Comparisons of control and AOAA-injected animals in a hippocampal kindling paradigm revealed that the duration of afterdischarges elicited by high-frequency stimulation of CA3, and the number of stimulations required to elicit kindled seizures were comparable. Taken together, our results reveal that the selective loss of layer III neurons induced by AOAA disrupts inhibitory function in CA1, but this does not create a circuit that is more prone to at least one form of kindling.