The lateral habenula (LHb) has a key role in integrating a variety of neural circuits associated with reward and aversive behaviors. There is limited information about how the different cell types and neuronal circuits within the LHb coordinate physiological and motivational states. Here, we report a cell type in the medial division of the LHb (LHbM) in male rats that is distinguished by: (1) a molecular signature for GABAergic neurotransmission (Slc32a1/VGAT) and estrogen receptor (Esr1/ERα) expression, at both mRNA and protein levels, as well as the mRNA for vesicular glutamate transporter Slc17a6/VGLUT2, which we term the GABAergic estrogen-receptive neuron (GERN); (2) its axonal projection patterns, identified by in vivo juxtacellular labeling, to both local LHb and to midbrain modulatory systems; and (3) its somatic expression of receptors for vasopressin, serotonin and dopamine, and mRNA for orexin receptor 2. This cell type is anatomically located to receive afferents from midbrain reward (dopamine and serotonin) and hypothalamic water and energy homeostasis (vasopressin and orexin) circuits. These afferents shared the expression of estrogen synthase (aromatase) and VGLUT2, both in their somata and axon terminals. We demonstrate dynamic changes in LHbM VGAT+ cell density, dependent upon gonadal functional status, that closely correlate with motivational behavior in response to predator and forced swim stressors. The findings suggest that the homeostasis and reward-related glutamatergic convergent projecting pathways to LHbMC employ a localized neurosteroid signaling mechanism via axonal expression of aromatase, to act as a switch for GERN excitation/inhibition output prevalence, influencing depressive or motivated behavior.