The GABA (gamma-aminobutyric-acid)-containing periglomerular (PG) cells provide the first level of inhibition to mitral and tufted (M/T) cells, the output neurons of the olfactory bulb. We find that stimulation of PG cells of the rat olfactory bulb results in self-inhibition: release of GABA from an individual PG cell activates GABA(A) receptors on the same neuron. PG cells normally contain high concentrations of intracellular chloride and consequently are depolarized by GABA. Despite this, GABA inhibits PG cell firing by shunting excitatory signals. Finally, GABA released during self-inhibition may spill over to neighboring PG cells, resulting in a lateral spread of inhibition. Given the gatekeeping role of PG cells in the olfactory network, GABA-mediated self-inhibition will favor M/T cell excitation during intense sensory stimulation.