The dentate gyrus (DG) is a critical entry point regulating function of the hippocampus. Integral to this role are the sparse, selective activation characteristics of the principal cells of the DG, dentate granule cells (DGCs). This sparse activation is important both in cognitive processing, and in regulation of pathological activity in disease states. Using a novel, combined dynamic imaging approach capable of resolving sequentially both synaptic potentials and action potential firing in large populations of DGCs, we characterized the postnatal development of firing properties of DG neurons in response to afferent activation in mouse hippocampal-entorhinal cortical slices. During postnatal development, there was a protracted, progressive sparsification of responses, accompanied by increased temporal precision of activation. Both of these phenomena were primarily mediated by changes in local circuit inhibition, and not by alterations in afferent innervation of DGCs, since GABAA antagonists normalized developmental differences. There was significant theta and gamma frequency-dependent synaptic recruitment of DGC activation in adult, but not developing, animals. Finally, we found that the decision to fire or not fire by individual DGCs was robust and repeatable at all stages of development. The protracted postnatal development of sparse, selective firing properties, increased temporal precision and frequency dependence of activation, and the fidelity with which the decision to fire is made are all fundamental circuit determinants of DGC excitation, critical in both normal and pathological function of the DG.