During the first 2 wk of mouse postnatal development, transient retinal circuits give rise to the spontaneous initiation and lateral propagation of depolarizations across the ganglion cell layer (GCL). Glutamatergic retinal waves occur during the second postnatal week, when GCL depolarizations are mediated by ionotropic glutamate receptors. Bipolar cells are the primary source of glutamate in the inner retina, indicating that the propagation of waves depends on their activation. Using the fluorescence resonance energy transfer-based optical sensor of glutamate FLII81E-1μ, we found that retinal waves are accompanied by a large transient increase in extrasynaptic glutamate throughout the inner plexiform layer. Using two-photon Ca(2+) imaging to record spontaneous Ca(2+) transients in large populations of cells, we found that despite this spatially diffuse source of depolarization, only a subset of neurons in the GCL and inner nuclear layer (INL) are robustly depolarized during retinal waves. Application of the glutamate transporter blocker dl-threo-β-benzyloxyaspartate (25 μM) led to a significant increase in cell participation in both layers, indicating that the concentration of extrasynaptic glutamate affects cell participation in both the INL and GCL. In contrast, blocking inhibitory transmission with the GABAA receptor antagonist gabazine and the glycine receptor antagonist strychnine increased cell participation in the GCL without significantly affecting the INL. These data indicate that during development, glutamate spillover provides a spatially diffuse source of depolarization, but that inhibitory circuits dictate which neurons within the GCL participate in retinal waves.