In mammals, somatosensory input activates feedback and feed-forward inhibitory circuits within the spinal cord dorsal horn to modulate sensory processing and thereby affecting sensory perception by the brain. Conventionally, feedback and feed-forward inhibitory activity evoked by somatosensory input to the dorsal horn is believed to be driven by glutamate, the principle excitatory neurotransmitter in primary afferent fibers. Substance P (SP), the prototypic neuropeptide released from primary afferent fibers to the dorsal horn, is regarded as a pain substance in the mammalian somatosensory system due to its action on nociceptive projection neurons. Here we report that endogenous SP drives a novel form of feed-forward inhibitory activity in the dorsal horn. The SP-driven feed-forward inhibitory activity is long-lasting and has a temporal phase distinct from glutamate-driven feed-forward inhibitory activity. Compromising SP-driven feed-forward inhibitory activity results in behavioral sensitization. Our findings reveal a fundamental role of SP in recruiting inhibitory activity for sensory processing, which may have important therapeutic implications in treating pathological pain conditions using SP receptors as targets.