Most adaptive behaviors require precise tracking of targets in space. In pursuit behavior with a moving target, mice use distance to target to guide their own movement continuously. Here, we show that in the sensorimotor striatum, parvalbumin-positive fast-spiking interneurons (FSIs) can represent the distance between self and target during pursuit behavior, while striatal projection neurons (SPNs), which receive FSI projections, can represent self-velocity. FSIs are shown to regulate velocity-related SPN activity during pursuit, so that movement velocity is continuously modulated by distance to target. Moreover, bidirectional manipulation of FSI activity can selectively disrupt performance by increasing or decreasing the self-target distance. Our results reveal a key role of the FSI-SPN interneuron circuit in pursuit behavior and elucidate how this circuit implements distance to velocity transformation required for the critical underlying computation.