Despite the pronounced neurological deficits associated with mental retardation and autism, it is unknown if altered neocortical circuit function occurs in these prevalent disorders. Here, we demonstrate specific alterations in local synaptic connections, membrane excitability, and circuit activity of defined neuron types in sensory neocortex of the mouse model of Fragile X Syndrome - the Fmr1 knockout (KO). Overall, these alterations result in hyperexcitability of neocortical circuits in the Fmr1 KO. Specifically, we observe a substantial deficit in local excitatory drive (~50%) targeting fast-spiking (FS) inhibitory neurons in layer 4 neurons of somatosensory, barrel cortex. This persists until at least 4 weeks of age suggesting it may be permanent. In contrast, monosynaptic GABAergic synaptic transmission was unaffected. Overall, these changes indicate that local feedback inhibition in neocortical layer 4 is severely impaired in the Fmr1 KO mouse. An increase in the intrinsic membrane excitability of excitatory neurons may further contribute to hyperexcitability of cortical networks. In support of this idea, persistent neocortical circuit activity, or UP states, elicited by thalamic stimulation were longer in duration in the Fmr1 KO mouse. In addition, network inhibition occurring at gamma frequencies (> 20Hz) was less synchronous. These changes may be involved in sensory stimulus hypersensitivity, epilepsy, and cognitive impairment associated with Fragile X and autism.