Brain function is fundamentally related in the most general sense to the richness of thalamocortical interconnectivity, and in particular to the rhythmic oscillatory properties of thalamocortical loops. Such rhythmicity is involved in the genesis of cognition, in the sleep-wake cycle, and in several neurological and psychiatric disorders. The role of GABA-mediated transmission in regulating these functional states is addressed here. At the cortical level, inhibition determines the spread of cortical activation by sculpting the precise activity patterns that underlie the details of cognition and motor control. At the thalamic level, GABA-mediated inhibition modulates and resets distribution of the ongoing thalamocortical rhythmic oscillations that bind multisensory inputs into a single cognitive experience and regulate arousal levels.