Animal behaviors are often composed of distinct alternating behavioral states. Neuromodulatory signals are thought to be critical for establishing stable behavioral states and for orchestrating transitions between them. However, we have only a limited understanding of how neuromodulatory systems act in vivo to alter circuit performance and shape behavior. To address these questions, we have investigated neuromodulatory signaling in the context of Caenorhabditis elegans egg-laying. Egg-laying activity cycles between discrete states-short bursts of egg deposition (active phases) that alternate with prolonged quiescent periods (inactive phases). Here using genetic, pharmacological and optogenetic approaches for cell-specific activation and inhibition, we show that a group of neurosecretory cells (uv1) located in close spatial proximity to the egg-laying neuromusculature direct the temporal organization of egg-laying by prolonging the duration of inactive phases. We demonstrate that the modulatory effects of the uv1 cells are mediated by peptides encoded by the nlp-7 and flp-11 genes that act locally to inhibit circuit activity, primarily by inhibiting vesicular release of serotonin from HSN motor neurons. This peptidergic inhibition is achieved, at least in part, by reducing synaptic vesicle abundance in the HSN motor neurons. By linking the in vivo actions of specific neuropeptide signaling systems with the generation of stable behavioral outcomes, our study reveals how cycles of neuromodulation emanating from non-neuronal cells can fundamentally shape the organization of a behavioral program.