Background: NMDA receptors are traditionally viewed as being located postsynaptically, at both synaptic and extrasynaptic locations. However, both anatomical and physiological studies have indicated the presence of NMDA receptors located presynaptically. Physiological studies of presynaptic NMDA receptors on neocortical GABAergic terminals and their possible role in synaptic plasticity are lacking. Methodology/Principal Findings: We report here that presynaptic NMDA receptors are present on GABAergic terminals in developing (postnatal day (PND) 12-15) but not older (PND21-25) rat frontal cortex. Using MK-801 in the recording pipette to block postsynaptic NMDA receptors, evoked and miniature IPSCs were recorded in layer II/III pyramidal cells in the presence of AMPA/KA receptor antagonists. Bath application of NMDA or NMDA receptor antagonists produced increases and decreases in mIPSC frequency, respectively. Physiologically patterned stimulation (10 bursts of 10 stimuli at 25 Hz delivered at 1.25 Hz) induced potentiation at inhibitory synapses in PND12-15 animals. This consisted of an initial rapid, large increase in IPSC amplitude followed by a significant but smaller persistent increase. Similar changes were not observed in PND21-25 animals. When 20 mM BAPTA was included in the recording pipette, potentiation was still observed in the PND12-15 group indicating that postsynaptic increases in calcium were not required. Potentiation was not observed when patterned stimulation was given in the presence of D-APV or the NR2B subunit antagonist Ro25-6981. Conclusions/Significance: The present results indicate that presynaptic NMDA receptors modulate GABA release onto neocortical pyramidal cells. Presynaptic NR2B subunit containing NMDA receptors are also involved in potentiation at developing GABAergic synapses in rat frontal cortex. Modulation of inhibitory GABAergic synapses by presynaptic NMDA receptors may be important for proper functioning of local cortical networks during development. © 2011 Mathew, Hablitz.