Interneurons are often classified according to neuropeptide content. However, it is becoming increasingly clear that neuropeptides are more than convenient neurochemical markers and can act as important modulators of neuronal activity. Recent advances in understanding neuropeptide release and physiological actions suggest that the interneuronal system of neuropeptides is crucial for maintaining appropriate brain function under normal and pathophysiological conditions. In particular, interneuronal neuropeptides appear to play roles in cognition and as endogenous anti-epileptic agents. This article describes current understanding of the conditions under which neuropeptides are released from interneurons, their specific effects on neuronal excitability and synaptic transmission, and the consequences of their loss of function.