The neurotransmitter GABA mediates the majority of rapid inhibition in the CNS. Inhibition can occur via the conventional mechanism, the transient activation of subsynaptic GABAAreceptors (GABAA-Rs), or via continuous activation of high-affinity receptors by low concentrations of ambient GABA, leading to “tonic” inhibition that can control levels of excitability and network activity. The GABAA-R α4 subunit is expressed at high levels in the dentate gyrus and thalamus and is suspected to contribute to extrasynaptic GABAA-R-mediated tonic inhibition. Mice were engineered to lack the α4 subunit by targeted disruption of theGabra4gene. α4 Subunit knockout mice are viable, breed normally, and are superficially indistinguishable from WT mice. In electrophysiological recordings, these mice show a lack of tonic inhibition in dentate granule cells and thalamic relay neurons. Behaviorally, knockout mice are insensitive to the ataxic, sedative, and analgesic effects of the novel hypnotic drug, gaboxadol. These data demonstrate that tonic inhibition in dentate granule cells and thalamic relay neurons is mediated by extrasynaptic GABAA-Rs containing the α4 subunit and that gaboxadol achieves its effects via the activation of this GABAA-R subtype.