Depolarization-induced suppression of inhibition (DSI) is a prevailing form of endocannabinoid signalling. However, several discrepancies have arisen regarding the roles played by the two major brain endocannabinoids, 2-arachidonoylglycerol (2-AG) and anandamide, in mediating DSI. Here we studied endocannabinoid signalling in the prefrontal cortex (PFC), where several components of the endocannabinoid system have been identified, but endocannabinoid signalling remains largely unexplored. In voltage clamp recordings from mouse PFC pyramidal neurons, depolarizing steps significantly suppressed IPSCs induced by application of the cholinergic agonist carbachol. DSI in PFC neurons was abolished by extra- or intracellular application of tetrahydrolipstatin (THL), an inhibitor of the 2-AG synthesis enzyme diacylglycerol lipase (DAGL). Moreover, DSI was enhanced by inhibiting 2-AG degradation, but was unaffected by inhibiting anandamide degradation. THL, however, may affect other enzymes of lipid metabolism and does not selectively target the α (DAGLα) or β (DAGLβ) isoforms of DAGL. Therefore, we studied DSI in the PFC of DAGLα(-/-) and DAGLβ(-/-) mice generated via insertional mutagenesis by gene-trapping with retroviral vectors. Gene trapping strongly reduced DAGLα or DAGLβ mRNA levels in a locus-specific manner. In DAGLα(-/-) mice cortical levels of 2-AG were significantly decreased and DSI was completely abolished, whereas DAGLβ deficiency did not alter cortical 2-AG levels or DSI. Importantly, cortical levels of anandamide were not significantly affected in DAGLα(-/-) or DAGLβ(-/-) mice. The chronic decrease of 2-AG levels in DAGLα(-/-) mice did not globally alter inhibitory transmission or the response of cannabinoid-sensitive synapses to cannabinoid receptor stimulation, although it altered some intrinsic membrane properties. Finally, we found that repetitive action potential firing of PFC pyramidal neurons suppressed synaptic inhibition in a DAGLα-dependent manner. These results show that DSI is a prominent form of endocannabinoid signalling in PFC circuits. Moreover, the close agreement between our pharmacological and genetic studies indicates that 2-AG synthesized by postsynaptic DAGLα mediates DSI in PFC neurons.