There has been much recent progress in understanding of the mechanism of ketamine's rapid and enduring antidepressant effects. Here we review recent insights from clinical and preclinical studies, with special emphasis of ketamine-induced changes in GABAergic synaptic transmission that are considered essential for its antidepressant therapeutic effects. Subanesthetic ketamine is now understood to exert its initial action by selectively blocking a subset of NMDA receptors on GABAergic interneurons, which results in disinhibition of glutamatergic target neurons, a surge in extracellular glutamate and correspondingly elevated glutamatergic synaptic transmission. This surge in glutamate appears to be corroborated by the rapid metabolism of ketamine into hydroxynorketamine, which acts at presynaptic sites to disinhibit the release of glutamate. Preclinical studies indicate that glutamate-induced activity triggers the release of BDNF, followed by transient activation of the mTOR pathway and increased expression of synaptic proteins, along with functional strengthening of glutamatergic synapses. This drug-on phase lasts for approximately 2 h and is followed by a period of days characterized by structural maturation of newly formed glutamatergic synapses and prominently enhanced GABAergic synaptic inhibition. Evidence from mouse models with constitutive antidepressant-like phenotypes suggests that this phase involves strengthened inhibition of dendrites by somatostatin-positive GABAergic interneurons and correspondingly reduced NMDA receptor-mediated Ca2+ entry into dendrites, which activates an intracellular signaling cascade that converges with the mTOR pathway onto increased activity of the eukaryotic elongation factor eEF2 and enhanced translation of dendritic mRNAs. Newly synthesized proteins such as BDNF may be important for the prolonged therapeutic effects of ketamine.