The amyloid precursor protein (APP) is the parent polypeptide from which amyloid-beta (Aβ) peptides, key etiological agents of Alzheimer’s disease (AD), are generated by sequential proteolytic processing involving β- and γ-secretases. APP mutations underlie familial, early-onset AD, and the involvement of APP in AD pathology has been extensively studied. However, APP has important physiological roles in the mammalian brain, particularly its modulation of synaptic functions and neuronal survival. Recent works have now shown that APP could directly modulate γ-aminobutyric acid (GABA) neurotransmission in two broad ways. Firstly, APP is shown to interact with and modulate the levels and activity of the neuron-specific Potassium-Chloride (K+-Cl−) cotransporter KCC2/SLC12A5. The latter is key to the maintenance of neuronal chloride (Cl−) levels and the GABA reversal potential (EGABA), and is therefore important for postsynaptic GABAergic inhibition through the ionotropic GABAA receptors. Secondly, APP binds to the sushi domain of metabotropic GABAB receptor 1a (GABABR1a). In this regard, APP complexes and is co-transported with GABAB receptor dimers bearing GABABR1a to the axonal presynaptic plasma membrane. On the other hand, secreted (s)APP generated by secretase cleavages could act as a GABABR1a-binding ligand that modulates presynaptic vesicle release. The discovery of these novel roles and activities of APP in GABAergic neurotransmission underlies the physiological importance of APP in postnatal brain function.