The suprachiasmatic nucleus (SCN) synchronizes circadian rhythms in behavior and physiology to the external light cycle, but the mechanisms by which this occurs are unclear. As the neuropeptide vasoactive intestinal peptide (VIP) is important for circadian light responses, we tested the hypothesis that rhythmic VIP-producing SCN neurons mediate circadian light responses in male and female mice. Using in vivo fiber photometry over multiple days, we found daily rhythms in spontaneous calcium events of SCN VIP neurons that peaked during the subjective day and were disrupted by constant light. The light-evoked calcium responses peaked around subjective dusk and were greater during the subjective night. Using novel VIP sensor cells, we found that the activity patterns in SCN VIP neurons correlated tightly with spontaneous and NMDA-evoked VIP release. Finally, in vivo hyperpolarization of VIP neurons attenuated light-induced shifts of daily rhythms in locomotion. We conclude that SCN VIP neurons exhibit circadian rhythms in spontaneous and light-responsive activity and are essential for the normal resetting of daily rhythms by environmental light.SIGNIFICANCE STATEMENT Daily rhythms in behavior and physiology, including sleep/wake and hormone release, are synchronized to local time by the master circadian pacemaker, the suprachiasmatic nucleus (SCN). The advent of artificial lighting and, consequently, light exposure at night, is associated with an increased risk of disease due to disrupted circadian rhythms. However, the mechanisms by which the SCN encodes normal and pathological light information are unclear. Here, we find that vasoactive intestinal peptide (VIP)-producing SCN neurons exhibit daily rhythms in neuronal activity and VIP release, and that blocking the activity of these neurons attenuates light-induced phase shifts. We conclude that rhythmic VIP neurons are an essential component of the circadian light transduction pathway.