Working memory refers to the temporary storage of information and is strongly associated with the prefrontal cortex (PFC). Persistent activity of cortical neurons, namely the activity that persists beyond the stimulus presentation, is considered the cellular correlate of working memory. Although past studies suggested that this type of activity is characteristic of large scale networks, recent experimental evidence imply that small, tightly interconnected clusters of neurons in the cortex may support similar functionalities. However, very little is known about the biophysical mechanisms giving rise to persistent activity in small-sized microcircuits in the PFC. Here, we present a detailed biophysically—yet morphologically simplified—microcircuit model of layer V PFC neurons that incorporates connectivity constraints and is validated against a multitude of experimental data. We show that (a) a small-sized network can exhibit persistent activity under realistic stimulus conditions. (b) Its emergence depends strongly on the interplay of dADP, NMDA, and GABA_B currents. (c) Although increases in stimulus duration increase the probability of persistent activity induction, variability in the stimulus firing frequency does not consistently influence it. (d) Modulation of ionic conductances (I_h, I_D, I_sAHP, I_caL, I_caN, I_caR) differentially controls persistent activity properties in a location dependent manner. These findings suggest that modulation of the microcircuit's firing characteristics is achieved primarily through changes in its intrinsic mechanism makeup, supporting the hypothesis of multiple bi-stable units in the PFC. Overall, the model generates a number of experimentally testable predictions that may lead to a better understanding of the biophysical mechanisms of persistent activity induction and modulation in the PFC.