In the mammalian visual system, sensory information captured by the retina is routed through the lateral geniculate nucleus (LGN) of the thalamus before reaching the cerebral cortex. The lateral geniculate circuits thus operate as a gateway for visual information flowing from the sensory periphery to the central nervous system. Traditionally, the LGN has been regarded as a passive relay station rather than an active processing center because the receptive fields of geniculate neurons closely resemble those of retinal ganglion cells. This simplistic view, however, is at odds with the complexity of the thalamic neural circuits – the LGN houses a substantial population of inhibitory neurons that can modulate the activity of the thalamocortical projecting neurons. How do the excitatory and inhibitory neurons in the LGN form circuits to process visual information from the retina to the cortex? In this dissertation, three studies that address this question will be presented. Using in vivo patch recordings, these studies directly probe the functional components of the thalamic neural circuit in the whole animal; automated visual stimulation, quantitative analysis and computer simulation are then used to reveal the principles underlying the spatio-temporal operation of retinothalamic transmission. Specifically, it will be demonstrated that inhibitory neurons of the LGN process retinal inputs in a distinct manner and actively transform the temporal patterns of neural activities from the retina to the cortex. Moreover, it will be shown that the biophysics of the retinothalamic synapse accounts for a recoding of the visual information represented in the thalamus. Taken together, this body of work creates a better understanding of neural mechanisms of the visual thalamus and their functional consequences for sensory information processing.