Using an antibody against 5α-reduced neurosteroids, predominantly allopregnanolone, we found that immunostaining in the CA1 region of rat hippocampal slices was confined to pyramidal neurons. This neurosteroid staining was increased following 15 min administration of 60 mm but not 20 mm ethanol, and the enhancement was blocked by finasteride and dutasteride, selective inhibitors of 5α-reductase, a key enzyme required for allopregnanolone synthesis. Consistent with a prior report indicating that N-methyl-D-aspartate (NMDA) receptor (NMDAR) activation can promote steroid production, we observed that D-2-amino-5-phosphonovalerate (APV), a competitive NMDAR antagonist, blocked the effects of 60 mm ethanol on staining. We previously reported that 60 mm ethanol inhibits the induction of long-term potentiation (LTP), a cellular model for memory formation, in the CA1 region. In the present study, LTP inhibition by 60 mm ethanol was also overcome by both the 5α-reductase inhibitors and by APV. Furthermore, the effects of ethanol on neurosteroid production and LTP were mimicked by a low concentration of NMDA (1 μm), and the ability of NMDA to inhibit LTP and to enhance neurosteroid staining was reversed by finasteride and dutasteride, as well as by APV. These results indicate that ethanol paradoxically enhances GABAergic neurosteroid production by activation of unblocked NMDARs and that acute LTP inhibition by ethanol represents a form of NMDAR-mediated metaplasticity.