ABSTRACT Sonic Hedgehog (Shh) and its patched-smoothened receptor complex control a variety of functions in the developing central nervous system (CNS) such as neural cell proliferation and differentiation. Recently, Shh signaling components have been found to be expressed at the synaptic level in the postnatal brain, suggesting a potential role in the regulation of synaptic transmission. Using in utero electroporation of constitutively active and dominant-negative forms of the Shh co-receptor smoothened (Smo), we studied the role of Smo signaling in the development and maturation of GABAergic transmission in the somatosensory cortex. Our results show that enhancing Smo activity during development accelerates the shift from depolarizing to hyperpolarizing GABA in dependence on functional expression of potassium-chloride cotransporter type 2 (KCC2). On the other hand, blocking Smo activity maintains GABA response in a depolarizing state in mature cortical neurons resulting in altered chloride homeostasis and increased seizure susceptibility. This study reveals an unexpected function of Smo signaling on the regulation of chloride homeostasis through the control of KCC2 cell surface stability and on the timing of the GABA inhibitory/excitatory shift in brain maturation. Summary statement The smoothened receptor controls the time course of inhibitory transmission through the stability of the potassium-chloride cotransporter type 2 at the plasma membrane.