Cortical neurons receive balanced excitatory and inhibitory synaptic currents. Such a balance could be established and maintained in an experience-dependent manner by synaptic plasticity at inhibitory synapses. We show that this mechanism provides an explanation for the sparse firing patterns observed in response to natural stimuli and fits well with a recently observed interaction of excitatory and inhibitory receptive field plasticity. The introduction of inhibitory plasticity in suitable recurrent networks provides a homeostatic mechanism that leads to asynchronous irregular network states. Further, it can accommodate synaptic memories with activity patterns that become indiscernible from the background state but can be reactivated by external stimuli. Our results suggest an essential role of inhibitory plasticity in the formation and maintenance of functional cortical circuitry.