(1) In order to investigate the effects of acetylcholine (ACh) on synaptic transmission in the rat hippocampus, extracellular and intracellular recordings were made from pyramidal neurons in an in vitro slice preparation while synaptic inputs to the cell population were stimulated. ACh was applied ionophoretically into somatic and dendritic layers of the slice. (2) ACh applied into the apical dendritic layer of the CA1 region reduced the size of the locally evoked field excitatory postsynaptic potential (EPSP) without altering the size of the afferent fiber volley. Likewise, dendritically applied ACh reduced the size of intracellularly recorded EPSPs. This effect of ACh appeared to be muscarinic since it was not affected by hexamethonium (up to 3 X 10–5 M) but was antagonized by atropine in a dose-dependent manner. (3) The distribution of Ach-sensitive sites matched closely the spatial distribution of activated synapses on the pyramidal cell dendrites as shown by ionophoretic mapping experiments. (4) In contrast to the effects of dendritic applications of ACh, ionophoresis of ACh into the cell layer resulted in an increase and prolongation of EPSPs and a transient decrease in the size of recurrent somatic inhibitory postsynaptic potentials (IPSPs). These effects on synaptic potentials could not be explained by the observed changes in membrane potential and input resistance following somatic application of ACh. (5) Short dendritic applications of ACh had no consistent effect on the membrane potential or slope conductance of pyramidal neurons and did not attenuate the depolarization evoked by brief dendritic applications of glutamate. In addition, the time course of ACh-reduced EPSPs was not different from control. (6) We conclude that ACh exerts a presynaptic inhibitory effect on both excitatory and inhibitory afferents to hippocampal pyramidal neurons. This effect of ACh is widespread, occurring in all regions of Ammon's horn tested as well as in stratum moleculare of fascia dentata.