In the aging brain, many of the alterations underlying cognitive and behavioral decline remain opaque. Caenorhabditis elegans offers a powerful model for aging research, with a simple, well-studied nervous system to further our understanding of the cellular modifications and functional alterations accompanying senescence. We perform multi-neuronal functional imaging across the aged C. elegans nervous system, measuring an age-associated breakdown in system-wide functional organization. At single-cell resolution, we detect shifts in activity dynamics toward higher frequencies. In addition, we measure a specific loss of inhibitory signaling that occurs early in the aging process and alters the systems' critical excitatory/inhibitory balance. These effects are recapitulated with mutation of the calcium channel subunit UNC-2/CaV2α. We find that manipulation of inhibitory GABA signaling can partially ameliorate or accelerate the effects of aging. The effects of aging are also partially mitigated by disruption of the insulin signaling pathway, known to increase longevity, or by a reduction of caspase activation. Data from mammals are consistent with our findings, suggesting a conserved shift in the balance of excitatory/inhibitory signaling with age that leads to breakdown in global neuronal dynamics and functional decline.