Orexin (also known as hypocretin) neurons are considered a key component of the ascending arousal system. They are active during wakefulness, at which time they drive and maintain arousal, and are silent during sleep. Their activity is controlled by long-range inputs from many sources, as well as by more short-range inputs, including from presumptive GABAergic neurons in the lateral hypothalamus/perifornical region (LH/PF). To characterize local GABAergic input to orexin neurons, we used channelrhodopsin-2-assisted circuit mapping in brain slices. We expressed channelrhodopsin-2 in GABAergic neurons (Vgat) in the LH/PF and recorded from genetically identified surrounding orexin neurons (LH/PF → Orx). We performed all experiments in mice of either sex. Photostimulation of LH/PF GABAergic neurons inhibited the firing of orexin neurons through the release of GABA, evoking GABA-mediated IPSCs in orexin neurons. These photo-evoked IPSCs were maintained in the presence of TTX, indicating direct connectivity. Carbachol inhibited LH/PF → Orx input through muscarinic receptors. By contrast, application of orexin was without effect on LH/PF → Orx input, whereas dynorphin, another peptide produced by orexin neurons, inhibited LH/PF → Orx input through κ-opioid receptors. Our results demonstrate that orexin neurons are under inhibitory control by local GABAergic neurons and that this input is depressed by cholinergic signaling, unaffected by orexin and inhibited by dynorphin. We propose that local release of dynorphin may, via collaterals, provides a positive feedback to orexin neurons and that, during wakefulness, orexin neurons may be disinhibited by acetylcholine and by their own release of dynorphin. The lateral hypothalamus contains important wake-promoting cell populations, including orexin-producing neurons. Intermingled with the orexin neurons, there are other cell populations that selectively discharge during nonrapid eye movement or rapid eye movement sleep. Some of these sleep-active neurons release GABA and are thought to inhibit wake-active neurons during rapid eye movement and nonrapid eye movement sleep. However, this hypothesis had not been tested. Here we show that orexin neurons are inhibited by a local GABAergic input. We propose that this local GABAergic input inhibits orexin neurons during sleep but that, during wakefulness, this input is depressed, possibly through cholinergically mediated disinhibition and/or by release of dynorphin from orexin neurons themselves.