GABAergic interneurons can phase the output of principal cells, giving rise to oscillatory activity in different frequency bands. Here we describe a new subtype of GABAergic interneuron, the multipolar bursting (MB) cell in the mouse neocortex. MB cells are parvalbumin positive but differ from fast-spiking multipolar (FS) cells in their morphological, neurochemical, and physiological properties. MB cells are reciprocally connected with layer 2/3 pyramidal cells and are coupled with each other by chemical and electrical synapses. MB cells innervate FS cells but not vice versa. MB to MB cell as well as MB to pyramidal cell synapses exhibit paired-pulse facilitation. Carbachol selectively induced synchronized theta frequency oscillations in MB cells. Synchrony required both gap junction coupling and GABAergic chemical transmission, but not excitatory glutamatergic input. Hence, MB cells form a distinct inhibitory network, which upon cholinergic drive can generate rhythmic and synchronous theta frequency activity, providing temporal coordination of pyramidal cell output.