The fine-tuning of circuits in sensory cortex requires sensory experience during an early critical period. Visual deprivation during the critical period has catastrophic effects on visual function, including loss of visual responsiveness to the deprived eye, reduced visual acuity, and loss of tuning to many stimulus characteristics. These changes occur faster than the remodelling of thalamocortical axons, but the intracortical plasticity mechanisms that underlie them are incompletely understood. Long-term depression of excitatory intracortical synapses has been proposed as a general candidate mechanism for the loss of cortical responsiveness after visual deprivation. Alternatively (or in addition), the decreased ability of the deprived eye to activate cortical neurons could be due to enhanced intracortical inhibition. Here we show that visual deprivation leaves excitatory connections in layer 4 (the primary input layer to cortex) unaffected, but markedly potentiates inhibitory feedback between fast-spiking basket cells (FS cells) and star pyramidal neurons (star pyramids). Further, a previously undescribed form of long-term potentiation of inhibition (LTPi) could be induced at synapses from FS cells to star pyramids, and was occluded by previous visual deprivation. These data suggest that potentiation of inhibition is a major cellular mechanism underlying the deprivation-induced degradation of visual function, and that this form of LTPi is important in fine-tuning cortical circuitry in response to visual experience.