The lateral septal area is rich in vasopressin V(1A) receptors and is densely innervated by vasopressinergic axons, originating mainly from the bed nucleus of the stria terminalis and the amygdala. Genetic and behavioral studies provide evidence that activation of vasopressin receptors in this area plays a determinant role in promoting social recognition. What could be the neuronal mechanism underlying this effect? Using rat brain slices and whole-cell recordings, we found that lateral septal neurons are under the influence of a basal GABAergic inhibitory input. Vasopressin, acting via V(1A) but not V(1B) receptors, greatly enhanced this input in nearly all neurons. The peptide had no effect on miniature inhibitory postsynaptic currents, indicating that it acted on receptors located in the somatodendritic membrane, rather than on axon terminals, of GABAergic interneurons. Cell-attached recordings showed that vasopressin can cause a direct excitation of a subpopulation of lateral septal neurons by acting via V(1A) but not V(1B) receptors. The presence in the lateral septum of V(1A) but not of V(1B) receptors was confirmed by competition binding studies using light microscopic autoradiography. In conclusion, vasopressin appears to act in the lateral septum in a dual mode: (i) by causing a direct excitation of a subpopulation of neurons, and (ii) by causing an indirect inhibition of virtually all lateral septal neurons. This modulation by vasopressin of the lateral septal circuitry may be part of the neuronal mechanism by which the peptide, acting via V(1A) receptors, promotes social recognition.