Ethanol exposure during fetal development is a leading cause of learning disabilities. Studies suggest that it alters learning and memory by permanently damaging the hippocampus. It is generally assumed that this is mediated, in part, via alterations in glutamatergic transmission. Although NMDA receptors are presumed to be the most sensitive targets of ethanol in immature neurons, this issue has not been explored in the developing hippocampus. We performed whole-cell patch-clamp recordings in hippocampal slices from neonatal rats. Unexpectedly, we found that acute ethanol (10-50 mM) exposure depresses inward currents elicited by local application of exogenous AMPA, but not NMDA, in CA3 pyramidal neurons. These findings revealed a direct effect of ethanol on postsynaptic AMPA receptors. Ethanol significantly decreased the amplitude of both AMPA and NMDA receptor-mediated EPSCs evoked by electrical stimulation. This effect was associated with an increase in the paired-pulse ratio and a decrease in the frequency of miniature EPSCs driven by depolarization of axonal terminals. These findings demonstrate that ethanol also acts at the presynaptic level. Omega-conotoxin-GVIA occluded the effect of ethanol on NMDA EPSCs, indicating that ethanol decreases glutamate release via inhibition of N-type voltage-gated Ca2+ channels. In more mature rats, ethanol did not affect the probability of glutamate release or postsynaptic AMPA receptor-mediated currents, but it did inhibit NMDA-mediated currents. We conclude that the mechanism by which ethanol inhibits glutamatergic transmission is age dependent and challenge the view that postsynaptic NMDA receptors are the primary targets of ethanol early in development.