Female mammals experience cyclical changes in sexual receptivity known as the estrus-cycle. Little is known about how estrus affects the cortex although alterations in sensation, cognition and the cyclic occurrence of epilepsy suggest brain-wide processing changes. We performed in vivo juxtacellular and whole-cell recordings in somatosensory cortex of female rats and found that the estrus-cycle potently altered cortical inhibition. Fast-spiking interneurons strongly varied their activity with the estrus-cycle and estradiol in ovariectomized females, while regular-spiking excitatory neurons did not change. In vivo whole-cell recordings revealed a varying excitation-to-inhibition-ratio with estrus. In situ hybridization for estrogen receptor β (Esr2) showed co-localization with parvalbumin-positive interneurons in deep cortical layers, mirroring the laminar distribution of our physiological findings. In vivo and in vitro experiments confirmed that estrogen acts locally to increase fastspiking interneuron excitability through an estrogen receptor β mechanism. We conclude that sex hormones powerfully modulate cortical inhibition in the female brain.