Thyroid hormones are necessary for brain development. γ-Amino-butyric acid (GABA)ergic interneurons comprise the bulk of local inhibitory circuitry in brain, many of which contain the calcium binding protein, parvalbumin (PV). A previous report indicated that severe postnatal hypothyroidism reduces PV immunoreactivity (IR) in rat neocortex. We examined PV-IR and GABA-mediated synaptic inhibition in the hippocampus of rats deprived of thyroid hormone from gestational d 6 until weaning on postnatal d 30. Pregnant dams were exposed to propylthiouracil (0, 3, 10 ppm) via the drinking water, which decreased maternal serum T₄ by approximately 50–75% and increased TSH. At weaning, T₄ was reduced by approximately 70% in offspring in the low-dose group and fell below detectable levels in high-dose animals. PV-IR was diminished in the hippocampus and neocortex of offspring killed on postnatal d 21, an effect that could be reversed by postnatal administration of T₄. Dose-dependent decreases in the density of PV-IR neurons were observed in neocortex and hippocampus, with the dentate gyrus showing the most severe reductions (50–75% below control counts). Altered staining persisted to adulthood despite the return of thyroid hormones to control levels. Developmental cross-fostering and adult-onset deprivation studies revealed that early postnatal hormone insufficiency was required for an alteration in PV-IR. Synaptic inhibition of the perforant path-dentate gyrus synapse evaluated in adult offspring, in vivo, revealed dose-dependent reductions in paired pulse depression indicative of a suppression of GABA-mediated inhibition. These data demonstrate that moderate degrees of thyroid hormone insufficiency during the early postnatal period permanently alters interneuron expression of PV and compromises inhibitory function in the hippocampus.