Top-down modulation of sensory processing is a prominent cognitive process that allows the animal to select sensory information most relevant to the current task, but the underlying circuit mechanisms remain poorly understood. Here we show that a region of mouse frontal cortex – the cingulate cortex (Cg) – can powerfully influence sensory processing in the primary visual cortex (V1) through its long-range projection that activates V1 local circuits containing specific subtypes of GABAergic interneurons. Optogenetic activation of Cg neurons strongly enhanced V1 neuron responses and improved the mouse’s performance of a visual discrimination task. Focal activation of Cg axons in V1 caused a response increase at the activation site but decrease at nearby locations. This center-surround modulation depended on local GABAergic interneurons, with somatostatin-positive interneurons contributing preferentially to surround suppression, and vasoactive intestinal peptide-positive interneurons contributing to center facilitation. These findings reveal how long-range cortico-cortical projections act through local microcircuits to exert spatially specific top-down modulation of sensory processing.