Auditory steady-state auditory responses (ASSRs), in which the evoked potential entrains to stimulus frequency and phase, are reduced in magnitude in patients with schizophrenia, particularly at 40 Hz. While the neural mechanisms responsible for ASSR generation and its perturbation in schizophrenia are unknown, it has been hypothesized that the GABAA receptor subtype may have an important role. Using an established rat model of schizophrenia, the neonatal ventral hippocampal lesion (NVHL) model, 40-Hz ASSRs were elicited from NVHL and sham rats to determine if NVHL rats show deficits comparable to schizophrenia, and to examine the role of GABAA receptors in ASSR generation. ASSR parameters were found to be stable across time in both NVHL and sham rats. Manipulation of the GABAA receptor by muscimol, a GABAA agonist, yielded a strong lesion×drug interaction, with ASSR magnitude and synchronization decreased in NVHL and increased in sham rats. The lesion×muscimol interaction was blocked by a GABAA receptor antagonist when given prior to muscimol administration, confirming the observed interaction was GABAA mediated. Together, these data suggest an alteration involving GABAA receptor function, and hence inhibitory transmission, in the neuronal networks responsible for ASSR generation in NVHL rats. These findings are consistent with prior evidence for alterations in GABA neurotransmitter systems in the NVHL model and suggest the utility of this animal modelling approach for exploring neurobiological mechanisms that generate or modulate ASSRs.