Benzodiazepines (BDZs) enhance GABAA receptor inhibition by direct actions on central BDZ receptors (CBRs). Although some BDZs also bind mitochondrial receptors [translocator protein (18 kDa) (TSPO)] and promote the synthesis of GABA-enhancing neurosteroids, the role of neurosteroids in the clinical effects of BDZs is unknown. In rat hippocampal slices, we compared midazolam, an anesthetic BDZ, with clonazepam, an anticonvulsant/anxiolytic BDZ that activates CBRs selectively. Midazolam, but not clonazepam, increased neurosteroid levels in CA1 pyramidal neurons without changing TSPO immunostaining. Midazolam, but not clonazepam, also augmented a form of spike inhibition after stimulation adjacent to the pyramidal cell layer and inhibited induction of long-term potentiation. These effects were prevented by finasteride, an inhibitor of neurosteroid synthesis, or 17PA [17-phenyl-(3α,5α)-androst-16-en-3-ol], a blocker of neurosteroid effects on GABAA receptors. Moreover, the synaptic effects were mimicked by a combination of clonazepam with FGIN (2-[2-(4-fluorophenyl)-1H- indol-3-yl]-N,N-dihexylacetamide), a selective TSPO agonist, or a combination of clonazepam with exogenous allopregnanolone. Consistent with these in vitro results, finasteride abolished the effects of midazolam on contextual fear learning when administrated 1 d before midazolam injection. Thus, dual activation of CBRs and TSPO appears to result in unique actions of clinically important BDZs. Furthermore, endogenous neurosteroids are shown to be important regulators of pyramidal neuron function and synaptic plasticity.