In the neocortex, synaptic inhibition shapes all forms of spontaneous and sensory evoked activity. Importantly, inhibitory transmission is highly plastic, but the functional role of inhibitory synaptic plasticity is unknown. In the mouse barrel cortex, activation of layer (L) 2/3 pyramidal neurons (PNs) elicits strong feedforward inhibition (FFI) onto L5 PNs. We find that FFI involving parvalbumin (PV)-expressing cells is strongly potentiated by postsynaptic PN burst firing. FFI plasticity modifies the PN excitation-to-inhibition (E/I) ratio, strongly modulates PN gain, and alters information transfer across cortical layers. Moreover, our LTPi-inducing protocol modifies firing of L5 PNs and alters the temporal association of PN spikes to γ-oscillations both in vitro and in vivo. All of these effects are captured by unbalancing the E/I ratio in a feedforward inhibition circuit model. Altogether, our results indicate that activity-dependent modulation of perisomatic inhibitory strength effectively influences the participation of single principal cortical neurons to cognition-relevant network activity.