Development of GABAergic interneurons and their early synaptic connections play a key role in the maturation of cortical circuits. However the functional differentiation of interneurons and their synaptic contacts in neuronal networks remained largely unknown. To answer this fundamental question we performed paired whole-cell patch-clamp recordings of synaptically connected dentate gyrus basket cells (BCs) in acute hippocampal slices of GAD67-EGFP expressing mice between postnatal day (P) 6 and 25. Our results revealed dramatic changes in both morphological and intrinsic membrane properties of BCs during development such as increase in total axonal length and reduction in membrane time constant. We observed furthermore, significant changes in the functional properties of GABAergic transmission at BC synapses. (1) Reduction in synaptic latency and failure rate. (2) Switch from presynaptic N-type to P/Q-type Ca2+-channels.(3) Switch from temporally unprecise to precise GABA release. (4) Increase in synaptic strength. (5) Reduction in the decay time constant of unitary IPSCs. The observed changes in morphological, intrinsic and synaptic properties indicate that BCs undergo a marked differentiation from slow to fast signaling devices during postnatal maturation.