Reliable activation of inhibitory pathways is essential for maintaining the balance between excitation and inhibition during cortical activity. Little is known, however, about the activation of these pathways at the level of the local neocortical microcircuit. We report a disynaptic inhibitory pathway among neocortical pyramidal cells (PCs). Inhibitory responses were evoked in layer 5 PCs following stimulation of individual neighboring PCs with trains of action potentials. The probability for inhibition between PCs was more than twice that of direct excitation, and inhibitory responses increased as a function of rate and duration of presynaptic discharge. Simultaneous somatic and dendritic recordings indicated that inhibition originated from PC apical and tuft dendrites. Multineuron whole-cell recordings from PCs and interneurons combined with morphological reconstructions revealed the mediating interneurons as Martinotti cells. Martinotti cells received facilitating synapses from PCs and formed reliable inhibitory synapses onto dendrites of neighboring PCs. We describe this feedback pathway and propose it as a central mechanism for regulation of cortical activity.