The clinical syndromes caused by frontotemporal lobar degeneration are heterogeneous, including the behavioural variant frontotemporal dementia (bvFTD) and progressive supranuclear palsy. Although pathologically distinct, they share many behavioural, cognitive and physiological features, which may in part arise from common deficits of major neurotransmitters such as γ-aminobutyric acid (GABA). Here, we quantify the GABAergic impairment and its restoration with dynamic causal modelling of a double-blind placebo-controlled crossover pharmaco-magnetoencephalography study. We analysed 17 patients with bvFTD, 15 patients with progressive supranuclear palsy, and 20 healthy age- and gender-matched controls. In addition to neuropsychological assessment and structural MRI, participants undertook two magnetoencephalography sessions using a roving auditory oddball paradigm: once on placebo and once on 10 mg of the oral GABA reuptake inhibitor tiagabine. A subgroup underwent ultrahigh-field magnetic resonance spectroscopy measurement of GABA concentration, which was reduced among patients. We identified deficits in frontotemporal processing using conductance-based biophysical models of local and global neuronal networks. The clinical relevance of this physiological deficit is indicated by the correlation between top-down connectivity from frontal to temporal cortex and clinical measures of cognitive and behavioural change. A critical validation of the biophysical modelling approach was evidence from parametric empirical Bayes analysis that GABA levels in patients, measured by spectroscopy, were related to posterior estimates of patients' GABAergic synaptic connectivity. Further evidence for the role of GABA in frontotemporal lobar degeneration came from confirmation that the effects of tiagabine on local circuits depended not only on participant group, but also on individual baseline GABA levels. Specifically, the phasic inhibition of deep cortico-cortical pyramidal neurons following tiagabine, but not placebo, was a function of GABA concentration. The study provides proof-of-concept for the potential of dynamic causal modelling to elucidate mechanisms of human neurodegenerative disease, and explains the variation in response to candidate therapies among patients. The laminar- and neurotransmitter-specific features of the modelling framework, can be used to study other treatment approaches and disorders. In the context of frontotemporal lobar degeneration, we suggest that neurophysiological restoration in selected patients, by targeting neurotransmitter deficits, could be used to bridge between clinical and preclinical models of disease, and inform the personalized selection of drugs and stratification of patients for future clinical trials.