Startle responses are attenuated by prepulse inhibition (PPI), which is considered to reflect a sensorimotor gating mechanism and is impaired in patients suffering from schizophrenia. A midbrain circuit that mediates PPI in rats has been proposed and behavioral experiments have indicated an important role of acetylcholine and GABA in inhibiting startle. We here test the hypothesis that activation of the midbrain neurons can inhibit startle signaling through a cholinergic mechanism. We have developed a brain slice that comprises startle mediating giant pontine neurons as well as midbrain mesopontine neurons required for PPI. Patch clamp recordings of startle mediating brainstem neurons combined with stimulation of sensory afferents within the startle pathway and activation of mesopontine neurons revealed a delayed inhibition of synaptic transmission 300 ms and 1 s after midbrain activation. The latter was reversed by the muscarinic antagonist scopolamine. Further, there was a shift in the paired pulse ratio 1 s but not 300 ms after midbrain stimulation. Our results show that there is a direct cholinergic projection from the proposed PPI midbrain circuit to startle mediating neurons in the brainstem and that this projection inhibits synaptic transmission in the startle pathway in a distinct time window through the activation of presynaptic muscarinic receptors. Moreover, there is indication for a different receptor that mediates inhibition through this projection in a shorter time window and is located postsynaptically. Our results contribute to the understanding of mechanisms underlying PPI, which is important for developing new targets in the treatment of disorders accompanied with pre-attentive cognitive deficits.