GABA plays a key role in both embryonic and neonatal brain development. For example, during early neonatal nervous system maturation, synaptic transmission, mediated by GABAAreceptors (GABAARs), undergoes a temporally specific form of synaptic plasticity to accommodate the changing requirements of maturing neural networks. Specifically, the duration of miniature inhibitory postsynaptic currents (mIPSCs), resulting from vesicular GABA activating synaptic GABAARs, is reduced, permitting neurones to appropriately influence the window for postsynaptic excitation. Conventionally, programmed expression changes to the subtype of synaptic GABAAR are primarily implicated in this plasticity. However, it is now evident that, in developing thalamic and cortical principal- and inter-neurones, an endogenous neurosteroid tone (eg, allopregnanolone) enhances synaptic GABAAR function. Furthermore, a cessation of steroidogenesis, as a result of a lack of substrate, or a co-factor, appears to be primarily responsible for early neonatal changes to GABAergic synaptic transmission, followed by further refinement, which results from subsequent alterations of the GABAAR subtype. The timing of this cessation of neurosteroid influence is neurone-specific, occurring by postnatal day (P)10 in the thalamus but approximately 1 week later in the cortex. Neurosteroid levels are not static and change dynamically in a variety of physiological and pathophysiological scenarios. Given that GABA plays an important role in brain development, abnormal perturbations of neonatal GABAAR-active neurosteroids may have not only a considerable immediate, but also a longer-term impact upon neural network activity. Here, we review recent evidence indicating that changes in neurosteroidogenesis substantially influence neonatal GABAergic synaptic transmission. We discuss the physiological relevance of these findings and how the interference of neurosteroid-GABAAR interaction early in life may contribute to psychiatric conditions later in life.