Slow spike and wave discharges (0.5– 4 Hz) are a feature of many epilepsies. They are linked to pathology of the thalamocortical axis and a thalamic mechanism has been elegantly described. Here we present evidence for a separate generator in local circuits of associational areas of neocortex manifest from a background, sleep-associated delta rhythm in rat. Loss of tonic neuromodulatory excitation, mediated by nicotinic acetylcholine or serotonin (5HT3A) receptors, of 5HT3-immunopositive interneurons caused an increase in amplitude and slowing of the delta rhythm until each period became the “wave” component of the spike and wave discharge. As with the normal delta rhythm, the wave of a spike and wave discharge originated in cortical layer 5. In contrast, the “spike” component of the spike and wave discharge originated from a relative failure of fast inhibition in layers 2/3—switching pyramidal cell action potential outputs from single, sparse spiking during delta rhythms to brief, intense burst spiking, phase-locked to the field spike. The mechanisms underlying this loss of superficial layer fast inhibition, and a concomitant increase in slow inhibition, appeared to be precipitated by a loss of neuropeptide Y (NPY)-mediated local circuit inhibition and a subsequent increase in vasoactive intestinal peptide (VIP)-mediated disinhibition. Blockade of NPY Y1 receptors was sufficient to generate spike and wave discharges, whereas blockade of VIP receptors almost completely abolished this form of epileptiform activity. These data suggest that aberrant, activity-dependent neuropeptide corelease can have catastrophic effects on neocortical dynamics.