The function and pharmacology of gamma-aminobutyric acid type A receptors (GABA(A)Rs) are of great physiological and clinical importance and have long been thought to be determined by the channel pore-forming subunits. We discovered that Shisa7, a single-passing transmembrane protein, localizes at GABAergic inhibitory synapses and interacts with GABA(A)Rs. Shisa7 controls receptor abundance at synapses and speeds up the channel deactivation kinetics. Shisa7 also potently enhances the action of diazepam, a classic benzodiazepine, on GABA(A)Rs. Genetic deletion of Shisa7 selectively impairs GABAergic transmission and diminishes the effects of diazepam in mice. Our data indicate that Shisa7 regulates GABA(A)R trafficking, function, and pharmacology and reveal a previously unknown molecular interaction that modulates benzodiazepine action in the brain.