Prenatal exposure to cocaine has been reported to produce long-lasting cognitive deficits, but the underlying mechanisms remain largely unknown. Here, we report that the induction of long-term potentiation (LTP) at excitatory synapses onto layer V pyramidal neurons in the medial prefrontal cortex (mPFC) is facilitated in rats exposed to cocaine in utero (3 mg/kg, intravenous twice daily during embryonic days 10-20). This facilitated LTP is caused by a reduction of A-type γ-aminobutyric acid (GABA(A)) receptor-mediated inhibition of mPFC pyramidal neurons. Biochemical experiments revealed a significant decrease in the surface expression of GABA(A) receptor α₁ subunits and total protein levels of γ₂ and δ subunits in mPFC slices from rats exposed to cocaine in utero. Prenatal cocaine exposure also leads to enhanced mPFC pyramidal neuronal excitability. However, the development of behavioural sensitization to repeated cocaine administration was impaired in rats that were exposed to cocaine in utero. These results suggest that prenatal cocaine exposure causes a long-lasting reduction of GABAergic inhibition in mPFC layer V pyramidal neurons, leading to an increased susceptibility of excitatory synapses to LTP induction during the postnatal period.