Predator-induced phenotypic plasticity describes the ability of prey to respond to an increased predation risk by developing adaptive phenotypes. Upon the perception of chemical predator cues, the freshwater crustacean Daphnia longicephala develops defensive crests against its predator Notonecta spec. (Heteroptera). Chemical predator perception initiates a cascade of biological reactions that leads to the development of these morphological features. Neuronal signaling is a central component in this series, however how the nervous system perceives and integrates environmental signals is not well understood. As neuronal activity is often accompanied by functional and structural plasticity of the nervous system, we hypothesized that predator perception is associated with structural and functional changes of nervous tissues. We observe structural plasticity as a volume increase of the central brain, which is independent of the total number of brain cells. In addition, we find functional plasticity in form of an increased number of inhibitory post-synaptic sites during the initial stage of defense development. Our results indicate a structural rewiring of nerve-cell connections upon predator perception and provide important insights into how the nervous system of prey species interprets predator cues and develops cost-benefit optimized defenses.