The function of cortical circuits depends critically on the balance between excitation and inhibition. This balance reflects not only the relative numbers of excitatory and inhibitory synapses but also their relative strengths. Recent studies of excitatory synapses in visual and somatosensory cortices have emphasized that synaptic strength is not a fixed quantity but is a dynamic variable that reflects recent presynaptic activity. Here, we compare the dynamics of synaptic transmission at excitatory and inhibitory synapses onto visual cortical pyramidal neurons. We find that inhibitory synapses show less overall depression than excitatory synapses and that the kinetics of recovery from depression also differ between the two classes of synapse. When excitatory and inhibitory synapses are stimulated concurrently, this differential depression produces a time- and frequency-dependent shift in the reversal potential of the composite postsynaptic current. These results indicate that the balance between excitation and inhibition can change dynamically as a function of activity.