GABA (gamma-aminobutyric acid) is a major inhibitory synaptic neurotransmitter with widespread distribution in the central nervous system (CNS). GABA can also modulate axonal excitability by activation of GABAA receptors in CNS white matter regions where synapses and neuronal cell bodies are not present. Studies on cultured glia cells have revealed the synthesis of GABA in rat optic nerve O-2A progenitor cells that give rise to oligodendrocytes and type 2 astrocytes in vitro. We report here that: (i) GABA is detected by immuno-electron microscopy in intact rat optic nerve and is localized to glia and pre-myelinated axons during the first few weeks of postnatal development, but is markedly reduced or absent in the adult; and (ii) neonatal optic nerve is depolarized by GABAA receptor agonists or by the inhibition of GABA uptake. These results demonstrate the presence of functional GABAA receptors, and GABA uptake and release mechanisms in developing rat optic nerve, and suggest that excitability of developing axons can be modulated by endogenous neurotransmitter at non-synaptic sites.