Cholecystokinin (CCK) via CCK-B receptors significantly enhances the GABAA receptor-mediated synaptic inhibition of principal olfactory bulb (OB) output neurons. This CCK action requires action potentials in presynaptic neurons. The enhanced inhibition of OB output neurons is a result of CCK-elevated inhibitory input from the glomerular circuit. CCK modulation of the glomerular circuit also leads to potentiated presynaptic inhibition of olfactory nerve terminals and postsynaptic inhibition of glomerular neurons. Selective excitation of short axon cells underlies the CCK-potentiated glomerular inhibition. Neuropeptides such as cholecystokinin (CCK) are important for many brain functions, including sensory processing. CCK is predominantly present in a subpopulation of excitatory neurons and activation of CCK receptors is implicated in olfactory signal processing in the olfactory bulb (OB). However, the cellular and circuit mechanisms underlying the actions of CCK in the OB remain elusive. In the present study, we characterized the effects of CCK on synaptic inhibition of the principal OB output neurons mitral/tufted cells (MTCs) followed by mechanistic analyses at both circuit and cellular levels. First, we found that CCK via CCK-B receptors enhances the GABAA receptor-mediated spontaneous IPSCs in MTCs. Second, CCK does not affect the action potential independent miniature IPSCs in MTCs. Third, CCK potentiates glomerular inhibition resulting in increased GABAB receptor-mediated presynaptic inhibition of olfactory nerve terminals and enhanced spontaneous IPSCs in MTCs and glomerular neurons. Fourth, CCK enhances miniature IPSCs in the excitatory external tufted cells, although neither in the inhibitory short axon cells (SACs) nor in periglomerular cells (PGCs). Finally, CCK excites all tested SACs and a very small minority of GABAergic neurons in the granule cell layer or in periglomerular cells, but not in deep SACs. These results demonstrate that CCK selectively activates SACs to engage the SAC-formed interglomerular circuit and thus elevates inhibition broadly in the OB glomerular layer. This modulation may prevent the system from saturating in response to a high concentration of odourants or facilitate the detection of weak stimuli by increasing signal-to-noise ratio.