Chloride (Cl-) homeostasis is critical for many cell functions including cell signaling and volume regulation. The action of GABA at GABA(A) receptors is primarily determined by the concentration of intracellular Cl-. Developmental regulation of intracellular Cl- results in a depolarizing response to GABA in immature neocortical neurons and a hyperpolarizing or shunting response in mature neocortical neurons. One protein that participates in Cl- homeostasis is the neuron-specific K+-Cl- cotransporter (KCC2). Thermodynamic considerations predict that in the physiological ranges of intracellular Cl- and extracellular K+ concentrations, KCC2 can act to either extrude or accumulate Cl-. To test this hypothesis, we examined KCC2 function in pyramidal cells from rat neocortical slices in mature (18-28 d postnatal) and immature (3-6 d postnatal) rats. Intracellular Cl- concentration was estimated from the reversal potential of whole-cell currents evoked by local application of exogenous GABA. Both increasing and decreasing the extracellular K+ concentration resulted in a concomitant change in intracellular Cl- concentration in neurons from mature rats. KCC2 inhibition by furosemide caused a change in the intracellular Cl- concentration that depended on the concentration of pipette Cl-; in recordings with low pipette Cl-, furosemide lowered intracellular Cl-, whereas in recordings with elevated pipette Cl-, furosemide raised intracellular Cl-. In neurons from neonatal rats, manipulation of extracellular K+ had no effect on intracellular Cl- concentration, consistent with the minimal KCC2 mRNA levels observed in neocortical neurons from immature animals. These data demonstrate a physiologically relevant and developmentally regulated role for KCC2 in Cl- homeostasis via both Cl- extrusion and accumulation.