Transcriptional upregulation of Kcc2b, the gene variant encoding the major isoform of the KCC2 chloride transporter, underlies a rapid perinatal decrease in intraneuronal chloride concentration (chloride shift), which is necessary for GABA to act inhibitory. Here we identify a novel repressor element-1 (RE-1) site in the 5' regulatory region of Kcc2b. In primary cortical neurons, which recapitulate the chloride shift in culture, the novel upstream RE-1 together with a known intronic RE-1 site function in concerted interaction to suppress Kcc2b transcription. With critical relevance for the chloride shift, only in the presence of the dual RE-1 site could inhibition of REST upregulate Kcc2b transcription. For this, we confirmed increased KCC2 protein expression and decreased intraneuronal chloride. Kcc2b developmental upregulation was potentiated by BDNF application, which was fully dependent on the presence of dual RE-1. In addition, the developmental chloride shift and GABA switch, from excitatory to inhibitory action, was accelerated by REST inhibition and slowed by REST overexpression. These results identify the REST-dual RE-1 interaction as a novel mechanism of transcriptional Kcc2b upregulation that significantly contributes to the ontogenetic shift in chloride concentration and GABA action in cortical neurons, which is fundamental for brain function in health and disease. Thus, we present here a new logic for the perinatal chloride shift, which is critical for establishment of GABAergic cortical inhibitory neurotransmission.