Amyloid-β precursor protein (APP) is central to the pathogenesis of Alzheimer’s disease, yet its physiological function remains unresolved. Accumulating evidence suggests that APP has a synaptic function mediated by an unidentified receptor for secreted APP (sAPP). Here we show that the sAPP extension domain directly bound the sushi 1 domain specific to the γ-aminobutyric acid type B receptor subunit 1a (GABA BR1a). sAPP-GABA BR1a binding suppressed synaptic transmission and enhanced short-term facilitation in mouse hippocampal synapses via inhibition of synaptic vesicle release. A 17–amino acid peptide corresponding to the GABA BR1a binding region within APP suppressed in vivo spontaneous neuronal activity in the hippocampus of anesthetized Thy1-GCaMP6s mice. Our findings identify GABA BR1a as a synaptic receptor for sAPP and reveal a physiological role for sAPP in regulating GABA BR1a function to modulate synaptic transmission.