Neuronal activity regulates the development and maturation of excitatory and inhibitory synapses in the mammalian brain. Several recent studies have identified signalling networks within neurons that control excitatory synapse development. However, less is known about the molecular mechanisms that regulate the activity-dependent development of GABA (gamma-aminobutyric acid)-releasing inhibitory synapses. Here we report the identification of a transcription factor, Npas4, that plays a role in the development of inhibitory synapses by regulating the expression of activity-dependent genes, which in turn control the number of GABA-releasing synapses that form on excitatory neurons. These findings demonstrate that the activity-dependent gene program regulates inhibitory synapse development, and suggest a new role for this program in controlling the homeostatic balance between synaptic excitation and inhibition.