Brain-derived neurotrophic factor (BDNF) has been implicated in regulating adult neurogenesis in the subgranular zone (SGZ) of the dentate gyrus; however, the mechanism underlying this regulation remains unclear. In this study, we found that Bdnf mRNA localized to distal dendrites of dentate gyrus granule cells isolated from wild-type (WT) mice, but not from Bdnf(klox/klox) mice where the long 3' untranslated region (UTR) of Bdnf mRNA is truncated. KCl-induced membrane depolarization stimulated release of dendritic BDNF translated from long 3' UTR Bdnf mRNA in cultured hippocampal neurons, but not from short 3' UTR Bdnf mRNA. Bdnf(klox/klox) mice exhibited reduced expression of glutamic acid decarboxylase 65 (a GABA synthase), increased proliferation of progenitor cells, and impaired differentiation and maturation of newborn neurons in the SGZ. These deficits in adult neurogenesis were rescued with administration of phenobarbital, an enhancer of GABA(A) receptor activity. Furthermore, we observed similar neurogenesis deficits in mice where the receptor for BDNF, TrkB, was selectively abolished in parvalbumin (PV)-expressing GABAergic interneurons. Thus, our data suggest that locally synthesized BDNF in dendrites of granule cells promotes differentiation and maturation of progenitor cells in the SGZ by enhancing GABA release, at least in part, from PV-expressing GABAergic interneurons.