The K-Cl co-transporter KCC2 (SLC12A5) tunes the efficacy of GABA receptor-mediated transmission by regulating the intraneuronal chloride concentration [Cl]. KCC2 undergoes activity-dependent regulation in both physiological and pathological conditions. The regulation of KCC2 by synaptic excitation is well documented; however, whether the transporter is regulated by synaptic inhibition is unknown. Here we report a mechanism of KCC2 regulation by GABA receptor (GABAR)-mediated transmission in mature hippocampal neurons. Enhancing GABAR-mediated inhibition confines KCC2 to the plasma membrane, while antagonizing inhibition reduces KCC2 surface expression by increasing the lateral diffusion and endocytosis of the transporter. This mechanism utilizes Cl as an intracellular secondary messenger and is dependent on phosphorylation of KCC2 at threonines 906 and 1007 by the Cl-sensing kinase WNK1. We propose this mechanism contributes to the homeostasis of synaptic inhibition by rapidly adjusting neuronal [Cl] to GABAR activity.