Subanesthetic ketamine evokes rapid and long-lasting antidepressant effects in human patients. The mechanism for ketamine’s effects remains elusive, but ketamine may broadly modulate brain plasticity processes. We show that single-dose ketamine reactivates adult mouse visual cortical plasticity and promotes functional recovery of visual acuity defects from amblyopia. Ketamine specifically induces downregulation of neuregulin-1 (NRG1) expression in parvalbumin-expressing (PV) inhibitory neurons in mouse visual cortex. NRG1 downregulation in PV neurons co-tracks both the fast onset and sustained decreases in synaptic inhibition to excitatory neurons, along with reduced synaptic excitation to PV neurons in vitro and in vivo following a single ketamine treatment. These effects are blocked by exogenous NRG1 as well as PV targeted receptor knockout. Thus, ketamine reactivation of adult visual cortical plasticity is mediated through rapid and sustained cortical disinhibition via downregulation of PV-specific NRG1 signaling. Our findings reveal the neural plasticity-based mechanism for ketamine-mediated functional recovery from adult amblyopia. •Disinhibition of excitatory cells by ketamine occurs in a fast and sustained manner•Ketamine evokes NRG1 downregulation and excitatory input loss in PV cells•Ketamine induced plasticity is blocked by exogenous NRG1 or its receptor knockout•PV inhibitory cells are the initial functional locus underlying ketamine’s effects Grieco et al. find that subanesthetic ketamine downregulates NRG1 expression in PV inhibitory cells, resulting in sustained cortical disinhibition to enhance cortical plasticity in adult visual cortex. Their work establishes the neural plasticity-based mechanism for ketamine-mediated functional recovery from amblyopia.