Excitation and inhibition in neocortical circuits are finely tuned and the balance between them is tightly regulated. Multiple lines of evidence, from psychiatric disease patients and animal models of psychiatric disease, have led to the hypothesis that changes in the cellular balance between excitation and inhibition (E/I balance) could lead to the severe behavioral deficits associated with diseases such as epilepsy, autism and schizophrenia. To evaluate this hypothesis experimentally, we developed several new optogenetic tools that allow simultaneous modulation of neocortical excitatory and inhibitory neurons. Microbial opsin-based optogenetic tools allow genetically-encoded, light-based control of neural circuits in vivo. The use of microbial opsins as optogenetic tools requires robust delivery of the opsin gene products to the plasma membrane of targeted neurons, efficient modulation of targeted cells through in vivo light delivery and readout strategies for recording the electrophysiological and behavioral outcomes of optical manipulation. We created a set of engineered channelrhodopsins with distinct spectral and temporal properties and targeted these optogenetic tools to cortical excitatory or inhibitory neurons. With this approach, we bidirectionally modulated the cellular excitation-inhibition balance in the prefrontal cortex of awake, behaving mice. We found that elevation, but not reduction, of the cellular E/I balance within the medial prefrontal cortex leads to profound impairment in cellular information processing and is associated with both specific behavioral deficits and increased high-frequency power in the 30-80 Hz range. Our results demonstrate the utility of new optogenetic tools in modulating neural activity and provide support for the cellular E/I balance hypothesis in neuropsychiatric disease.