© 2015 the authors. Circuit dysfunction in complex brain disorders such as schizophrenia and autism is caused by imbalances between inhibitory and excitatory synaptic transmission (I/E). Short-term plasticity differentially alters responses from excitatory and inhibitory synapses, causing the I/E ratio to change as a function of frequency. However, little is known about I/E ratio dynamics in complex brain disorders. Transcriptional dysregulation in interneurons, particularly parvalbumin interneurons, is a consistent pathophysiological feature of schizophrenia. Peroxisome proliferator activated receptor γ coactivator 1α (PGC-1α) is a transcriptional coactivator that in hippocampus is highly concentrated in inhibitory interneurons and regulates parvalbumin transcription. Here, we used PGC-1α-/-mice to investigate effects of interneuron transcriptional dysregulation on the dynamics of the I/E ratio at the synaptic and circuit level in hippocampus. We find that loss of PGC-1α increases the I/E ratio onto CA1 pyramidal cells in response to Schaffer collateral stimulation in slices from young adult mice. The underlying mechanism is enhanced basal inhibition, including increased inhibition from parvalbumin interneurons. This decreases the spread of activation in CA1 and dramatically limits pyramidal cell spiking, reducing hippocampal output. The I/E ratio andCA1output are partially restored by paired-pulse stimulation at short intervals, indicating frequency-dependent effects. However, circuit dysfunction persists, indicated by alterations in kainate-induced gamma oscillations and impaired nest building. Together, these results show that transcriptional dysregulation in hippocampal interneurons causes frequency-dependent alterations in I/E ratio and circuit function, suggesting that PGC-1α deficiency in psychiatric and neurological disorders contributes to disease by causing functionally relevant alterations in I/E balance.