Dopamine (DA) is required for hippocampal-dependent memory and long-term potentiation (LTP) at CA1 Schaffer collateral (SC) synapses. It is therefore surprising that exogenously applied DA has little effect on SC synapses, but suppresses CA1 perforant path (PP) inputs. To examine DA actions under more physiological conditions, we used optogenetics to release DA from ventral tegmental area inputs to hippocampus. Unlike exogenous DA application, optogenetic release of DA caused a bidirectional, activity-dependent modulation of SC synapses, with no effect on PP inputs. Low levels of DA release, simulating tonic DA neuron firing, depressed the SC response through a D4 receptor-dependent enhancement of feedforward inhibition mediated by parvalbumin-expressing interneurons. Higher levels of DA release, simulating phasic firing, increased SC responses through a D1 receptor-dependent enhancement of excitatory transmission. Thus, tonic-phasic transitions in DA neuron firing in response to motivational demands may cause a modulatory switch from inhibition to enhancement of hippocampal information flow.