The siphon withdrawal response (SWR) of Aplysia supports several forms of learning that are under both excitatory and inhibitory control. Here we examine the role of interneuronal processing on the regulation of siphon responses, with an emphasis on the role of inhibition. We focus on the recurrent circuit formed by the excitatory interneuron L29 and the inhibitory interneuron L30, and show that this circuit provides a mechanism for use-dependent regulation of excitatory input onto siphon motor neurons. We utilized a reduced preparation in which input to the SWR circuit was elicited by taps applied to the siphon; tap-evoked EPSPs were measured in LFS siphon motor neurons. We first show that L29 is an important source of excitatory input to LFS motor neurons: voltage-clamp inactivation of a single L29 (out of five) results in a significant reduction of tap-evoked EPSPs. Next, we demonstrate that direct intracellular activation of L29, surprisingly, produces transient inhibition of evoked input to motor neurons that lasts up to 40 sec. We then provide several lines of evidence that the mechanism of L29-induced inhibition is through the recruitment and potentiation of recurrent inhibition from L30: (1) L29 activation results in reduced tap-evoked responses of other (nonactivated) L29s; (2) direct activation of L30 mimics the inhibitory effects produced by L29 activation (LFS neurons receive no direct synaptic input from L30); and (3) the L30 IPSP is significantly potentiated as a result of its own activity, whether produced directly (by L30 activation) or indirectly (through L29 activation). This IPSP potentiation has the same time course as L29-induced inhibition of motor neuron responses. Thus activity-dependent potentiation of L30 transmission can inhibit motor neuron responses, in part through inactivation of the L29 interneuronal pool. Finally, we propose that L29-L30 interactions provide a mechanism for dynamic gain control in the SWR.