The hypothesis that lesion-induced hippocampal granule cell axon sprouting causes granule cell hyperexcitability was tested in the rat. Kainic acid damaged dentate hilar neurons, decreased granule cell inhibition, and increased granule cell excitability to afferent stimulation, all before synaptic reorganization occurred. Granule cell recurrent inhibition and relatively normal excitability were unexpectedly restored as granule cell axon sprouting occurred. Anatomical analysis revealed that a dense innervation of inhibitory neurons by aberrant granule cell axons was a consistent feature in each animal. These results indicate that granule cell hyperexcitability precedes dentate synaptic reorganization and is associated with the selective interneuron loss that is the presumed stimulus for axon sprouting. Thus, if granule cell axon sprouting has functional significance, it may be primarily inhibitory, rather than epileptogenic, in nature.