Inhibition contributes to various brain computations from sensory motor transformations to cognitive operations. While most studies on inhibition focus on GABA, the main excitatory neurotransmitter of the brain, glutamate, can also elicit inhibition via metabotropic glutamate receptors (mGluRs). The function of mGluR-mediated inhibition remains largely elusive. Here, we investigated the role of group III mGluR-dependent inhibition in the habenula. This primarily glutamatergic and conserved forebrain region acts as a hub between multiple forebrain inputs and neuromodulatory mid- and hindbrain targets that regulate adaptive behaviors. We showed that both zebrafish and mice habenula express group III mGluRs. We identified that group III mGluRs regulate the membrane potential and calcium activity of zebrafish dorsal habenula. Pharmacological and genetic perturbation of group III mGluRs increased sensory-evoked excitation and reduced selectivity of habenular neurons to different sensory modalities. We also observed that inhibition is the main channel of communication between primarily glutamatergic habenula neurons. Blocking group III mGluRs reduced inhibition within habenula and increased correlations during spontaneous activity. In line with such inhibition within habenula, we identified that multi-sensory information is integrated mainly through competition and suppression across habenular neurons, which in part relies on group III mGluRs. Finally, genetic perturbation of a habenula-specific group III mGluR, mGluR6a, amplified neural responses and defensive behaviors evoked by sensory stimulation and environmental changes. Altogether, our results revealed that mGluR driven inhibition is essential in encoding, integration, and communication of information between Hb neurons, ultimately playing a critical role in regulating defensive and adaptive behaviors.