Although dexterity relies on the constant transmission of sensory information, unchecked feedback can be disruptive. Yet how somatosensory feedback from the hands is regulated and whether this modulation influences movement remain unclear. We found that mouse tactile afferents recruit neurons in the brainstem cuneate nucleus, whose activity is modulated by distinct classes of local inhibitory neurons. Manipulation of these inhibitory circuits suppresses or enhances the transmission of tactile information, which affects manual behaviors. Top-down cortical pathways innervate cuneate in a complementary pattern, with somatosensory cortical neurons targeting the core tactile region of cuneate and a large rostral cortical population driving feed-forward inhibition of tactile transmission through an inhibitory shell. These findings identify a circuit basis for tactile feedback modulation that enables the effective execution of dexterous movement.