Identifying the mechanisms underlying cognitive development in early life is a critical objective. The expression of insulin-like growth factor binding protein 2 (IGFBP2) in the hippocampus increases during neonatal development and is associated with learning and memory, but a causal connection has not been established. Here, it is reported that neurons and astrocytes expressing IGFBP2 are distributed throughout the hippocampus. IGFBP2 enhances excitatory inputs onto CA1 pyramidal neurons, facilitating intrinsic excitability and spike transmission, and regulates plasticity at excitatory synapses in a cell-type specific manner. It facilitates long-term potentiation (LTP) by enhancing N-methyl-d-aspartate (NMDA) receptor-dependent excitatory postsynaptic current (EPSC), and enhances neurite proliferation and elongation. Knockout of igfbp2 reduces the numbers of pyramidal cells and interneurons, impairs LTP and cognitive performance, and reduces tonic excitation of pyramidal neurons that are all rescued by IGFBP2. The results provide insight into the requirement for IGFBP2 in cognition in early life.