Many nonglutamatergic synaptic terminals in the mammalian brain contain the vesicular glutamate transporter 3 (VGLUT3), indicating that they co-release the excitatory neurotransmitter glutamate. However, the functional role of glutamate co-transmission at these synapses is poorly understood. In the auditory system, VGLUT3 expression and glutamate co-transmission are prominent in a developing GABA/glycinergic sound-localization pathway. We found that mice with a genetic deletion of Vglut3 (also known as Slc17a8) had disrupted glutamate co-transmission and severe impairment in the refinement of this inhibitory pathway. Specifically, loss of glutamate co-transmission disrupted synaptic silencing and the strengthening of GABA/glycinergic connections that normally occur with maturation. Functional mapping studies further revealed that these deficits markedly degraded the precision of tonotopy in this inhibitory auditory pathway. These results indicate that glutamate co-transmission is crucial for the synaptic reorganization and topographic specification of a developing inhibitory circuit.