Steroids exert long-term modulatory effects on numerous physiological functions by acting at intracellular/nuclear receptors influencing gene transcription. Steroids and neurosteroids can also rapidly modulate membrane excitability and synaptic transmission by interacting with ion channels, that is, ionotropic neurotransmitter receptors or voltage-dependent Ca2+ or K+ channels. More recently, the cloning of a plasma membrane-located G protein-coupled receptor for progestins in various species has suggested that steroids/neurosteroids could also influence second-messenger pathways by directly interacting with specific membrane receptors. Here we review the experimental evidence implicating steroids/neurosteroids in the modulation of synaptic transmission and the evidence for a role of endogenously produced neurosteroids in such modulatory effects. We present some of our recent results concerning inhibitory synaptic transmission in lamina II of the spinal cord and show that endogenous 5alpha-reduced neurosteroids are produced locally in lamina II and modulate synaptic gamma-aminobutyric acid A(GABAA) receptor function during development, as well as during inflammatory pain. The production of 5alpha-reduced neurosteroids is controlled by the endogenous activation of the peripheral benzodiazepine receptor (PBR), which initiates the first step of neurosteroidogenesis by stimulating the translocation of cholesterol across the inner mitochondrial membrane. Tonic neurosteroidogenesis observed in immature animals was decreased during postnatal development, resulting in an acceleration of GABAA receptor-mediated miniature inhibitory postsynaptic current (mIPSC) kinetics observed in the adult. Stimulation of the PBR resulted in a prolongation of GABAergic mIPSCs at all ages and was observed during inflammatory pain. Neurosteroidogenesis might play an important role in the control of nociception at least at the spinal cord level.