GABAB receptors are the G protein-coupled receptors for the main inhibitory neurotransmitter in the brain, gamma-aminobutyric acid (GABA). Molecular diversity in the GABAB system arises from the GABAB1a and GABAB1b subunit isoforms that solely differ in their ectodomains by a pair of sushi repeats that is unique to GABAB1a. Using a combined genetic, physiological, and morphological approach, we now demonstrate that GABAB1 isoforms localize to distinct synaptic sites and convey separate functions in vivo. At hippocampal CA3-to-CA1 synapses, GABAB1a assembles heteroreceptors inhibiting glutamate release, while predominantly GABAB1b mediates postsynaptic inhibition. Electron microscopy reveals a synaptic distribution of GABAB1 isoforms that agrees with the observed functional differences. Transfected CA3 neurons selectively express GABAB1a in distal axons, suggesting that the sushi repeats, a conserved protein interaction motif, specify heteroreceptor localization. The constitutive absence of GABAB1a but not GABAB1b results in impaired synaptic plasticity and hippocampus-dependent memory, emphasizing molecular differences in synaptic GABAB functions.