Protease-activated receptor 1 (PAR1) is a member of the G-protein coupled receptors that are proteolytically activated by serine proteases. Recent studies suggest a definite contribution of PAR1 to brain functions, including learning and memory. However, cellular mechanisms by which PAR1 activation influences neuronal activity are not well understood. Here we show that PAR1 activation drives retrograde endocannabinoid signaling and thereby regulates synaptic transmission. In cultured hippocampal neurons from rat, PAR1 activation by thrombin or PAR1-specific peptide agonists transiently suppressed inhibitory transmission at cannabinoid-sensitive, but not cannabinoid-insensitive, synapses. The PAR1-induced suppression of synaptic transmission was accompanied by an increase in paired-pulse ratio, and was blocked by a cannabinoid CB 1 receptor antagonist. The PAR1-induced suppression was blocked by pharmacological inhibition of postsynaptic diacylglycerol lipase (DGL), a key enzyme for biosynthesis of the major endocannabinoid 2-arachidonoylglycerol (2-AG), and was absent in knock-out mice lacking the ␣ isoform of DGL. The PAR1-induced IPSC suppression remained intact under the blockade of metabotropic glutamate receptors and was largely resistant to the treatment that blocked Ca 2ϩ elevation in glial cells following PAR1 activation, which excludes the major contribution of glial PAR1 in IPSC suppression. We conclude that activation of neuronal PAR1 triggers retrograde signaling mediated by 2-AG, which activates presynaptic CB 1 receptors and suppresses transmitter release at hippocampal inhibitory synapses.