The neuropeptides orexin (also known as hypocretin), produced in hypothalamic neurons, are critical regulators of sleep and wakefulness. The symptoms and pathophysiology of the sleep disorder "narcolepsy", caused by an orexin deficiency provide insight into the physiological roles of orexin. Electrophysiological studies have identified several neurotransmitters and neuromodulators that activate or inhibit the activity of orexin neurons, and GABA is thought to be one of the major factors that influence orexin neuronal activity. In the present study, to evaluate the physiological relevance of GABA-mediated regulation of orexin neurons in vivo, we examined the involvement of GABA-B receptors in the regulation of orexin neurons, by utilizing mice with a selective deletion of the GABA-B1 subunit in these neurons. Patch clamp recording studies showed that the inhibitory response of orexin neurons to a GABA-B agonist was completely eliminated in brain slices from the conditional GABA-B1 knockout mice. Surprisingly, orexin neurons were also less responsive to glutamate because the augmented GABA-A receptor-mediated inhibition increases the membrane conductance. These observations indicate that absence of GABA-B receptors decreases the sensitivity of orexin neurons to both excitatory and inhibitory inputs. Sleep state analysis of the conditional GABA-B1 knockout mice revealed that these mice displayed a robust fragmentation of the sleep/waking states during both light and dark periods. These observations suggest that GABA-B receptors in orexin neurons are essential for the normal regulation of orexin neuronal activity, and regulation of sleep/wakefulness states.