Ethanol consumption during development affects the maturation of hippocampal circuits by mechanisms that are not fully understood. Ethanol acts as a depressant in the mature CNS and it has been assumed that this also applies to immature neurons. We investigated whether ethanol targets the neuronal network activity that is involved in the refinement of developing hippocampal synapses. This activity appears during the growth spurt period in the form of giant depolarizing potentials (GDPs). GDPs are generated by the excitatory actions of GABA and glutamate via a positive feedback circuit involving pyramidal neurons and interneurons. We found that ethanol potently increases GDP frequency in the CA3 hippocampal region of slices from neonatal rats. It also increased the frequency of GDP-driven Ca2+ transients in pyramidal neurons and increased the frequency of GABAA receptor-mediated spontaneous postsynaptic currents in CA3 pyramidal cells and interneurons. The ethanol-induced potentiation of GABAergic activity is probably the result of increased quantal GABA release at interneuronal synapses but not enhanced neuronal excitability. These findings demonstrate that ethanol is a potent stimulant of developing neuronal circuits, which might contribute to the abnormal hippocampal development associated with fetal alcohol syndrome and alcohol-related neurodevelopmental disorders.