The metabotropic gamma-amino-butyric acid B receptor (GABABR) is a G protein-coupled receptor that mediates neuronal inhibition by the neurotransmitter GABA. Here, we identified putative GABAB receptors and signaling modulators in the basal sea anemone Nematostella vectensis. Activation of GABABR signaling reversibly arrests planula-to-polyp transformation during early development and affects the neurogenic program. We identified four Nematostella GABABR homologs that have the conserved 3D extracellular domains and residues needed for binding of GABA and the GABABR agonist baclofen. Transcriptomic analysis, combined with spatial analysis of baclofen-treated planulae, revealed that baclofen down-regulated pro-neural factors such as NvSoxB(2), NvNeuroD1 and NvElav1. Baclofen also inhibited neuron development and extended neurites, resulting in an under-developed and less organized nervous system. Our results shed light on cnidarian development and suggest an evolutionarily conserved function for GABABR in regulation of neurogenesis, highlighting Nematostella as a new model system to study GABABR signaling.