gamma-Aminobutyric acid (GABA) is the major inhibitory transmitter in the mature brain but is excitatory in the developing cortex. We found that mouse zona incerta (ZI) projection neurons form a GABAergic axon plexus in neonatal cortical layer 1, making synapses with neurons in both deep and superficial layers. A similar depolarizing GABAergic plexus exists in the developing human cortex. Selectively silencing mouse ZI GABAergic neurons at birth decreased synaptic activity and apical dendritic complexity of cortical neurons. The ZI GABAergic projection becomes inhibitory with maturation and can block epileptiform activity in the adult brain. These data reveal an early-developing GABAergic projection from the ZI to cortical layer 1 that is essential for proper development of cortical neurons and balances excitation with inhibition in the adult cortex.