A functionally hypoactive prefrontal cortex (PFC) is thought to contribute to decreased cognitive inhibitory control over drug-seeking behavior in cocaine addicts. Alterations in PFC dopamine (DA) and γ-aminobutyric acid (GABA) transmission are involved in the development of behavioral sensitization to cocaine, and repeated exposure to cocaine decreases DA D2 receptor (D2R) function in the PFC. We used recordings in PFC slices from adult rats to investigate how repeated cocaine treatment followed by 2 weeks of withdrawal affects DA modulation of GABA transmission and interneuron firing. In agreement with previous results in drug-naïve animals we found that in saline-treated control animals DA (20 μM) modulated evoked inhibitory post-synaptic currents (eIPSCs) in a biphasic, time- and receptor-dependent manner. Activation of D2Rs transiently reduced, whereas D1 receptor activation persistently increased the amplitude of eIPSCs. In cocaine-sensitized animals the D2R-dependent modulation of eIPSCs was abolished and the time course of DA effects was altered. In both saline- and cocaine-treated animals the effects of DA on eIPSCs were paralleled by distinct changes in spontaneous IPSCs (sIPSCs). In cocaine-treated animals the alterations in DA modulation of eIPSCs and sIPSCs correlated with a lack of D2R-specific reduction in action potential-independent GABA release, which might normally oppose D1-dependent increases in GABA transmission. Recordings from interneurons furthermore show that D2R activation can increase current-evoked spike firing in saline, but not in cocaine-treated animals. Altered DA regulation of inhibition during cocaine withdrawal could disturb normal cortical processing and contribute to a hypoactive PFC.