The hippocampus is among the regions in the brain richest in M1 cholinergic receptors. Topical application of acetylcholine (ACh) onto hippocampal slices produces a characteristic complex response consisting of a depolarization, an increase in input resistance especially upon depolarization and a blockade of a slow afterhyperpolarization (AHP). The first two of these responses can be recorded also in non-cholinergic septal neurons in an area which contains about 8% of the M1 muscarinic receptors found in the hippocampus. The responses of hippocampal but not septal neurons to ACh involve an increase in the spontaneous synaptic activity and a decrease in evoked responses to afferent stimulation. The dissociated hippocampal culture was used to study these presynaptic effects. The neurons in culture possess muscarinic receptors which develop gradually over a period of several weeks after plating. ACh rarely depolarizes hippocampal neurons in culture. Instead, it causes an increase in spontaneous discharge of small postsynaptic currents (PSC's) and a marked decrease of large, evoked PSC's. In some cultured hippocampal cells ACh reduced ICa without affecting any of several outward K currents studied. It is suggested that ACh reduces evoked activity by reducing Ca currents at presynaptic terminals.