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An essential characteristic of nervous systems is their capacity to reshape functional connectivity in response to physiological and environmental cues. Endogenous signals, including neuropeptides, governs nervous system plasticity. Particularly, oxytocin has been recognized for its role in mediating activity-dependent circuit changes. These oxytocin-dependent changes occur at the synaptic level and consequently shape the cellular composition of circuits. Here we discuss recent advances that illustrate how oxytocin functions to reshape neural circuitry in response to environmental changes. Excitingly, recent findings pave the way for promising therapeutic applications of oxytocin to treat neurodevelopmental and neuropsychiatric diseases.