Numerous observations suggest diverse and modulatory roles for serotonin (5-HT) in cortex. Because of the diversity of cell types and multiple receptor subtypes and actions of 5-HT, it has proven difficult to determine the overall role of 5-HT in cortical function. To provide a broader perspective of cellular actions, we studied the effects of 5-HT on morphologically and physiologically identified pyramidal and nonpyramidal neurons from layers I-III of primary somatosensory and motor cortex. We found cell type-specific differences in response to 5-HT. Four cell types were observed in layer I: Cajal Retzius, pia surface, vertical axon, and horizontal axon cells. The physiology of these cells ranged from fast spiking (FS) to regular spiking (RS). In layers II-III, we observed interneurons with FS, RS, and late spiking physiology. Morphologically, these cells varied from bipolar to multipolar and included basket-like and chandelier cells. 5-HT depolarized or hyperpolarized pyramidal neurons and reduced the slow afterhyperpolarization and spike frequency. Consistent with a role in facilitating tonic inhibition, 5-HT2 receptor activation increased the frequency of spontaneous IPSCs in pyramidal neurons. In layers II-III, 70% of interneurons were depolarized by 5-HT. In layer I, 57% of cells with axonal projections to layers II-III (vertical axon) were depolarized by 5-HT, whereas 63% of cells whose axons remain in layer I (horizontal axon) were hyperpolarized by 5-HT. We propose a functional segregation of 5-HT effects on cortical information processing, based on the pattern of axonal arborization.