The N-palmitoylethanolamine (PEA) is an endogenous member of the endocannabinoid system (ECS) with several biological functions, including a neuromodulatory activity in the central nervous system. To shed light on the neuronal function of PEA, we investigated its involvement in the control of both excitatory and inhibitory transmission in the murine striatum, a brain region strongly modulated by the ECS. By means of electrophysiological recordings, we showed that PEA modulates inhibitory synaptic transmission, through activation of GPR55 receptors, promoting a transient increase of GABAergic spontaneous inhibitory postsynaptic current (sIPSC) frequency. The subsequently rundown effect on sIPSC frequency was secondary to the delayed stimulation of presynaptic cannabinoid CB1 receptors (CB1Rs) by the endocannabinoid 2-AG, whose synthesis was stimulated by PEA on postsynaptic neurons. Our results indicate that PEA, acting on GPR55, enhances GABA transmission in the striatum, and triggers a parallel synthesis of 2-AG at the postsynaptic site, that in turn acts in a retrograde manner to inhibit GABA release through the stimulation of presynaptic CB1Rs. This electrophysiological study identifies a previously unrecognized function of PEA and of GPR55, demonstrating that GABAergic transmission is under the control of this compound and revealing that PEA modulates the release of the endocannabinoid 2-AG.