Neuronal activity regulates the development and maturation of excitatory and inhibitory synapses in the mammalian brain. Several recent studies have identified signalling networks within neurons that control excitatory synapse development. However, less is known about the molecular mechanisms that regulate the activity-dependent development of GABA (γ-aminobutyric acid)-releasing inhibitory synapses. Here we report the identification of a transcription factor, Npas4, that plays a role in the development of inhibitory synapses by regulating the expression of activity-dependent genes, which in turn control the number of GABA-releasing synapses that form on excitatory neurons. These findings demonstrate that the activity-dependent gene program regulates inhibitory synapse development, and suggest a new role for this program in controlling the homeostatic balance between synaptic excitation and inhibition. A fine balance between the numbers of excitatory and inhibitory synapses must be maintained for neuronal circuits to function. The intracellular molecular signalling pathways involved in activity-dependent formation of synapses, particularly inhibitory ones, are largely unknown. A new study has identified the transcription factor Npas4 as a 'master switch' acting in brain cells to maintain the homeostatic balance between synaptic excitation and inhibition, a balance that is thought to be disrupted in neurologic disorders such as autism, epilepsy and schizophrenia. Npas4 acts by regulating the expression of more than 200 activity-dependent genes, which in turn control the number of GABA-mediated synapses that form excitatory neurons.