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Abstract Background Aldh1a1 neurons are a subtype of gamma-aminobutyric acid (GABA) inhibitory neurons that use Aldh1a1 rather than glutamate decarboxylase (GAD) as an enzyme for synthesizing GABA transmitters. However, the behaviors and circuits of this newly identified subtype of inhibitory interneurons remain unknown. Methods We generated a mutant mouse line in which cyclization recombination enzyme (CRE) was expressed under the control of the Aldh1a1 promotor (Aldh1a1-CRE mice). Using this mutant strain of mice together with the heterozygous male Alzheimer’s disease (AD) related model mice (APPswe/PSEN1dE9, or AD mice) and a genetically modified retrograde and anterograde synaptic tracing strategy, we have studied a specific synaptic circuit of Aldh1a1 neurons with system-level function and disease progression in AD mice. Results We demonstrate that Aldh1a1 neurons encode delay of gratification that measures self-control skills in decision making by projecting inhibitory synapses directly onto excitatory glutamate neurons in the intermediate lateral septum (EGNIS) and receiving synaptic inputs from layer 5b pyramidal neurons in the medial prefrontal cortex (L5PN). L5PN → Aldh1a1 synaptic transmission undergoes long-term potentiation (LTP). Pathway specific inhibition by either genetic silencing presynaptic terminals or antagonizing postsynaptic receptors impairs delay of gratification, resulting in the impulsive behaviors. Further studies show that reconstitution of Aldh1a1-deficient neurons with the expression of exogenous Aldh1a1 (eAldh1a1) restores Aldh1a1 → EGNIS synaptic transmission and rescues the impulsive behaviors in AD mice. Conclusions These results not only identify a specific function and circuit of Aldh1a1 neurons but also provide a cellular point of entry to an important but understudied synaptic mechanism for the induction of impulsive behaviors at an early stage of AD.