Evidence for prefrontal cortical (PFC) GABAergic dysfunction is one of the most consistent findings in schizophrenia and may contribute to cognitive deficits. Recent studies suggest that the mGlu subtype of metabotropic glutamate receptor regulates cortical inhibition; however, understanding the mechanisms through which mGlu positive allosteric modulators (PAMs) regulate PFC microcircuit function and cognition is essential for advancing these potential therapeutics toward the clinic. We report a series of electrophysiology, optogenetic, pharmacological magnetic resonance imaging, and animal behavior studies demonstrating that activation of mGlu receptors increases inhibitory transmission in the prelimbic PFC by selective excitation of somatostatin-expressing interneurons (SST-INs). An mGlu PAM reverses cortical hyperactivity and concomitant cognitive deficits induced by N-methyl-d-aspartate (NMDA) receptor antagonists. Using in vivo optogenetics, we show that prelimbic SST-INs are necessary for mGlu PAM efficacy. Collectively, these findings suggest that mGlu PAMs could reverse cortical GABAergic deficits and exhibit efficacy in treating cognitive dysfunction in schizophrenia.