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Neuropeptides play key roles in shaping the organization and function of neuronal circuits. In the inferior colliculus (IC), which is in the auditory midbrain, Neuropeptide Y (NPY) is expressed by a class of GABAergic neurons that project locally and outside the IC. Most neurons in the IC have local axon collaterals; however, the organization and function of local circuits in the IC remain unknown. We previously found that excitatory neurons in the IC can express the NPY Y1 receptor (Y1R+) and application of the Y1R agonist, [Leu31, Pro34]-NPY (LP-NPY), decreases the excitability of Y1R+ neurons. As NPY signaling regulates recurrent excitation in other brain regions, we hypothesized that Y1R+ neurons form interconnected local circuits in the IC and that NPY decreases the strength of recurrent excitation in these circuits. To test this hypothesis, we used optogenetics to activate Y1R+ neurons in mice of both sexes while recording from other neurons in the ipsilateral IC. We found that nearly 80% of glutamatergic IC neurons express the Y1 receptor, providing extensive opportunities for NPY signaling to regulate local circuits. Additionally, Y1R+ neuron synapses exhibited modest short-term synaptic plasticity, suggesting that local excitatory circuits maintain their influence over computations during sustained stimuli. We further found that application of LP-NPY decreased recurrent excitation in the IC, suggesting that NPY signaling strongly regulates local circuit function in the auditory midbrain. Our findings show that Y1R+ excitatory neurons form interconnected local circuits in the IC, and their influence over local circuits is regulated by NPY signaling. [ABSTRACT FROM AUTHOR]