The activity of neurons is correlated, and this correlation affects how the brain processes information. We study the neural circuit mechanisms of correlations by analyzing a network model characterized by strong and heterogeneous interactions: excitatory input drives the fluctuations of neural activity, which are counterbalanced by inhibitory feedback. In particular, excitatory input tends to correlate neurons, while inhibitory feedback reduces correlations. We demonstrate that heterogeneity of synaptic connections is necessary for this inhibition of correlations. We calculate statistical averages over the disordered synaptic interactions and apply our findings to both a simple linear model and a more realistic spiking network model. We find that correlations at zero time lag are positive and of magnitude , where K is the number of connections to a neuron. Correlations at longer timescales are of smaller magnitude, of order K−1, implying that inhibition of correlations occurs quickly, on a timescale of . The small magnitude of correlations agrees qualitatively with physiological measurements in the cerebral cortex and basal ganglia. The model could be used to study correlations in brain regions dominated by recurrent inhibition, such as the striatum and globus pallidus.