Gamma frequency (30 -100 Hz) oscillations in the mature cortex underlie higher cognitive functions. Fast signaling in GABAergic interneuron networks plays a key role in the generation of these oscillations. During development of the rodent brain, gamma activity appears at the end of the first postnatal week, but frequency and synchrony reach adult levels only by the fourth week. However, the mechanisms underlying the maturation of gamma activity are unclear. Here we demonstrate that hippocampal basket cells (BCs), the proposed cellular substrate of gamma oscillations, undergo marked changes in their morphological, intrinsic, and synaptic properties between postnatal day 6 (P6) and P25. During maturation, action potential duration, propagation time, duration of the release period, and decay time constant of IPSCs decreases by ϳ30 -60%. Thus, postnatal development converts BCs from slow into fast signaling devices. Computational analysis reveals that BC networks with young intrinsic and synaptic properties as well as reduced connectivity generate oscillations with moderate coherence in the lower gamma frequency range. In contrast, BC networks with mature properties and increased connectivity generate highly coherent activity in the upper gamma frequency band. Thus, late postnatal maturation of BCs enhances coherence in neuronal networks and will thereby contribute to the development of cognitive brain functions.