1. The properties of a well-defined type of GABAergic local circuit neuron, the axo-axonic cell (n = 17), were investigated in rat hippocampal slice preparations. During intracellular recording we injected axo-axonic cells with biocytin and subsequently identified them with correlated light and electron microscopy. Employing an immunogold-silver intensification technique we showed that one of the physiologically characterized cells was immunoreactive for gamma-aminobutyric acid (GABA). 2. Axo-axonic cells were encountered in the dentate gyrus (n = 5) as well as subfields CA3 (n = 2) and CA1 (n = 10). They generally had smooth, beaded dendrites that extended throughout all hippocampal layers. Their axons ramified densely in the cell body layers and in the subjacent stratum oriens or hilus, respectively. Tested with electron microscopy, labeled terminals (n = 53) established synapses exclusively with the axon initial segment of principal cells in strata oriens and pyramidale and rarely in lower radiatum. Within a 400-microns slice a single CA1 axo-axonic cell was estimated to be in synaptic contact with 686 pyramidal cells. 3. Axo-axonic cells (n = 14) had a mean resting membrane potential of -65.1 mV, an average input resistance of 73.9 M omega, and a mean time constant of 7.7 ms. Action potentials were of short duration (389-microseconds width at half-amplitude) and had a mean amplitude of 64.1 mV. 4. Nine of 10 tested cells showed a varying degree of spike frequency adaptation in response to depolarizing current injection. Current-evoked action potentials were usually curtailed by a deep (10.2 mV) short-latency afterhyperpolarization (AHP) with a mean duration of 28.1 ms. 5. Cells with strong spike frequency accommodation (n = 5) had a characteristic firing pattern with numerous spike doublets. These appeared to be triggered by an underlying depolarizing afterpotential. In the same cells, prolonged bursts of action potentials were followed by a prominent long-duration AHP with a mean time constant of 1.15 s. 6. Axo-axonic cells responded to the stimulation of afferent pathways with short-latency excitatory postsynaptic potentials (EPSPs) or at higher stimulation intensity with up to three action potentials. Axo-axonic cells in the dentate gyrus could be activated by stimulating the CA3 area as well as the perforant path, whereas in the CA1 area responses were elicited after shocks to the perforant path, Schaffer collaterals, and the stratum oriens-alveus border. 7. In the CA1 area the EPSP amplitude increased in response to membrane hyperpolarization.(ABSTRACT TRUNCATED AT 400 WORDS)