D-serine is synthesized by serine racemase (SR) and is a co-agonist at forebrain N-methyl-D-aspartate receptors (NMDARs). D-serine and SR are expressed primarily in neurons, but not in quiescent astrocytes. In this study, we examined the localization of D-serine and SR in the mouse striatum and the effects of genetically silencing SR expression in GABAergic interneurons (iSR-/-). iSR-/- mice had substantially reduced SR expression almost exclusively in striatum, but only exhibited marginal D-serine reduction. SR positive cells in the striatum showed strong co-localization with dopamine- and cyclic AMP-regulated neuronal phosphoprotein (DARPP32) in wild type mice. Transgenic fluorescent reporter mice for either the D1 or D2 dopamine receptors exhibited a 65:35 ratio for co-localization with D1and D2 receptor positive cells, respectively. These results indicate that GABAergic medium spiny neurons receiving dopaminergic inputs in striatum robustly and uniformly express SR. In behavioral tests, iSR-/- mice showed a blunted response to the hedonic and stimulant effects of cocaine, without affecting anxiety-related behaviors. Because the cocaine effects have been shown in the constitutive SR-/- mice, the restriction of the blunted response to cocaine to iSR-/- mice reinforces the conclusion that D-serine in striatal GABAergic neurons plays an important role in mediating dopaminergic stimulant effects. Results in this study suggest that SR in striatal GABAergic neurons is synthesizing D-serine, not as a glutamatergic co-transmitter, but rather as an autocrine whereby the GABAergic neurons control the excitability of their NMDARs by determining the availability of the co-agonist, D-serine.