Glutamatergic gliotransmission provides a stimulatory input to excitatory synapses in the hippocampal dentate gyrus. Here, we show that tumor necrosis factor-alpha (TNFα) critically controls this process. With constitutive TNFα present, activation of astrocyte P2Y1 receptors induces localized [Ca(2+)](i) elevations followed by glutamate release and presynaptic NMDA receptor-dependent synaptic potentiation. In preparations lacking TNFα, astrocytes respond with identical [Ca(2+)](i) elevations but fail to induce neuromodulation. We find that TNFα specifically controls the glutamate release step of gliotransmission. In cultured astrocytes lacking TNFα glutamate exocytosis is dramatically slowed down due to altered vesicle docking. Addition of low picomolar TNFα promptly reconstitutes both normal exocytosis in culture and gliotransmission in situ. Alternatively, gliotransmission can be re-established without adding TNFα, by limiting glutamate uptake, which compensates slower release. These findings demonstrate that gliotransmission and its synaptic effects are controlled not only by astrocyte [Ca(2+)](i) elevations but also by permissive/homeostatic factors like TNFα.