In the present study, we investigated the role of Neuroligin 2 (NL2) in synaptic transmission and network function using the mouse retina as a model circuit. We show that NL2 is preferentially located at GABAergic rather than glycinergic or glutamatergic postsynapses. The absence of NL2 from the retina resulted in a severe reduction of GABA(A) receptor clustering, and in subtle alterations of the retinal circuitry. Light processing was impaired accordingly, and retinal ganglion cells, the output neurons of the retina, showed increased basal activity and altered coding of visual information. Together, our data indicate that NL2 is essential for the functional integrity of GABAergic signaling and as a consequence, for information processing in the retina.