Structural plasticity in the adult brain is essential for adaptive behaviors and is thought to contribute to a variety of neurological and psychiatric disorders. Medium spiny neurons of the striatum show a high degree of structural plasticity that is modulated by dopamine through unknown signaling mechanisms. Here, we demonstrate that overexpression of dopamine D2 receptors in medium spiny neurons increases their membrane excitability and decreases the complexity and length of their dendritic arbors. These changes can be reversed in the adult animal after restoring D2 receptors to wild-type levels, demonstrating a remarkable degree of structural plasticity in the adult striatum. Increased excitability and decreased dendritic arborization are associated with downregulation of inward rectifier potassium channels (Kir2.1/2.3). Downregulation of Kir2 function is critical for the neurophysiological and morphological changes in vivo because virally mediated expression of a dominant-negative Kir2 channel is sufficient to recapitulate the changes in D2 transgenic mice. These findings may have important implications for the understanding of basal ganglia disorders, and more specifically schizophrenia, in which excessive activation of striatal D2 receptors has long been hypothesized to be of pathophysiologic significance.