As neuronal development progresses, GABAergic synaptic transmission undergoes a defined program of reconfiguration. For example, GABAA receptor (GABAAR)-mediated synaptic currents, (miniature inhibitory postsynaptic currents; mIPSCs), which initially exhibit a relatively slow decay phase, become progressively reduced in duration, thereby supporting the temporal resolution required for mature network activity. Here we report that during postnatal development of cortical layer 2/3 pyramidal neurons, GABAAR-mediated phasic inhibition is influenced by a resident neurosteroid tone, which wanes in the second postnatal week, resulting in the brief phasic events characteristic of mature neuronal signalling. Treatment of cortical slices with the immediate precursor of 5α-pregnan-3α-ol-20-one (5α3α), the GABAAR-inactive 5α-dihydroprogesterone, (5α-DHP), greatly prolonged the mIPSCs of P20 pyramidal neurons, demonstrating these more mature neurons retain the capacity to synthesize GABAAR-active neurosteroids, but now lack the endogenous steroid substrate. Previously, such developmental plasticity of phasic inhibition was ascribed to the expression of synaptic GABAARs incorporating the α1 subunit. However, the duration of mIPSCs recorded from L2/3 cortical neurons derived from α1 subunit deleted mice, were similarly under the developmental influence of a neurosteroid tone. In addition to principal cells, synaptic GABAARs of L2/3 interneurons were modulated by native neurosteroids in a development-dependent manner. In summary, local neurosteroids influence synaptic transmission during a crucial period of cortical neurodevelopment, findings which may be of importance for establishing normal network connectivity.