The effect of activation of cholinergic receptors on long-term potentiation (LTP) in rat piriform cortex pyramidal cells was studied using extracellular and intracellular recordings in brain slice preparations. The functional role of this modulation was studied in a realistic network biophysical stimulation. Repetitive stimuli were applied in two paradigms: one in which the recorded cell was held at its resting potential and one in which synaptic activity was superimposed on a depolarizing pulse strong enough to evoke four action potentials. In the absence of cholinergic modulation, stimulation at 5 Hz induced LTP primarily in the second condition (13.7%, n = 6 out of 9, measured at 10 min after tetanus). When stimuli were applied in the presence of the muscarinic agonist carbachol (20 microM), LTP of greater amplitude was induced in both paradigms (resting: 41.5%, n = 11 out of 16, depolarized: 36%, n = 5 out of 7, measured at 10 min after tetanus). Increases in excitatory postsynaptic potential (EPSP) amplitudes in the presence of carbachol were gradual, starting at the time 5 Hz stimuli were applied and continuing until an action potential was evoked synaptically. In the presence of the NMDA receptor antagonist 2-amino-5-phosphonovaleric acid (APV), LTP could not be induced. The muscarinic antagonist atropine also prevented LTP induction in the presence of carbachol. Cholinergic modulation of synaptic plasticity was examined in a previously developed realistic biophysical network simulation. In simulations, use of a gradual rate of synaptic modification prevented excessive strengthening of synapses, which could cause interference between stored patterns. The effect of excess synaptic strengthening can be avoided by introducing activity dependent depression of synaptic strength. Coactivation of learning and depression rules results in a stable system where no interference occurs, at any rate of learning. Implementing the depression rule only during recall does not improve the network's performance. This implies that reduction in the strength of synaptic connections should occur in the presence of ACh, more than in normal conditions. We propose that two effects of ACh--enhancement of LTP and enhancement of LTD--should act together to increase the stability of the cortical network in the process of acquiring information.