The cannabinoid neurotransmitter system comprises cannabinoid G protein-coupled membrane receptors (CB1 and CB2), endogenous cannabinoids (endocannabinoids), as well as mechanisms for their synthesis, membrane transport and metabolism. Within the brain the marijuana constituent delta9-tetrahydrocannabinol (THC) produces its pharmacological actions by acting on cannabinoid CB1 receptors. THC modulates neuronal excitability by inhibiting synaptic transmission via presynaptic CB1-mediated mechanisms. More recently, it has been established that physiological stimulation of neurons can induce the synthesis of endocannabinoids, which also modulate synaptic transmission via cannabinoid CB1 and other receptor systems. These endogenously synthesised endocannabinoids appear to act as retrograde signalling agents, reducing synaptic inputs onto the stimulated neuron in a highly selective and restricted manner. In this review we describe the cellular mechanisms underlying retrograde endocannabinoid signalling.