Transplantation of GABAergic interneurons (INs) can provide long-term functional benefits in animal models of epilepsy and other neurological disorders. Whereas GABAergic INs can be differentiated from embryonic stem cells, alternative sources of GABAergic INs may be more tractable for disease modeling and transplantation. We identified five factors (Foxg1, Sox2, Ascl1, Dlx5, and Lhx6) that convert mouse fibroblasts into induced GABAergic INs (iGABA-INs) possessing molecular signatures of telencephalic INs. Factor overexpression activates transcriptional networks required for GABAergic fate specification. iGABA-INs display progressively maturing firing patterns comparable to cortical INs, form functional synapses, and release GABA. Importantly, iGABA-INs survive and mature upon being grafted into mouse hippocampus. Optogenetic stimulation demonstrated functional integration of grafted iGABA-INs into host circuitry, triggering inhibition of host granule neuron activity. These five factors also converted human cells into functional GABAergic INs. These properties suggest that iGABA-INs have potential for disease modeling and cell-based therapeutic approaches to neurological disorders.