N-methyl-d-aspartate receptor (NMDAR) activation requires both the binding of glutamate to its recognition site and occupancy of the strychnine insensitive glycine modulatory site (GMS). Pharmacological studies suggest that the glycine transporter, GlyT1, maintains subsaturating concentrations of glycine at synaptic NMDARs. To characterize further the role of GlyT1, we generated mice in which the gene encoding GlyT1 was inactivated by homologous recombination through insertion of a PGK-Neo cassette in place of exons 2 and 3. Real-time quantitative PCR revealed no transcripts in newborn homozygous [GlyT1(-/-)] mice and a 50% reduction in heterozygous (HZ) [GlyT1(+/-)] mice as compared with WT littermates. The activity of Na(+)-dependent glycine transport in forebrain homogenates was similarly affected. Homozygous mice died within 12 h of birth. In acute hippocampal slices, exogenous glycine or d-serine (10 microM) enhanced NMDAR currents with Schaffer collateral stimulation in WT mice but not HZ mice, suggesting that the GMS was more occupied in the latter. The NMDAR/alpha-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid receptor ratio of the excitatory postsynaptic currents was significantly increased in the HZ mice. In the water maze, the HZ mice exhibited better spatial retention. Furthermore, HZ mice were less sensitive to an amphetamine disruption of prepulse inhibition than WT mice but were more sensitive to the effects of MK-801. Thus, reduced expression of GlyT1 enhances hippocampal NMDAR function and memory retention and protects against an amphetamine disruption of sensory gating, suggesting that drugs which inhibit GlyT1 might have both cognitive enhancing and antipsychotic effects.