Dopaminergic neurons of the substantia nigra pars compacta are excited by nicotine and acetylcholine, and possess both high-affinity nicotine binding sites and intense acetylcholinesterase activity, consistent with a cholinoceptive role. A probable source of cholinergic afferents is the pedunculopontine nucleus, which forms part of a prominent group of cholinergic perikarya located caudal to the substantia nigra in the tegmentum. Although pedunculopontine efferents, many of them cholinergic, project to the substantia nigra pars compacta, it has not been established whether they terminate in this structure. In the first experiment, which combined retrograde tracing with immunohistochemical visualization of cholinergic neurons, cholinergic cells in and around the pedunculopontine nucleus were found to send projections to the substantia nigra. This projection was almost completely ipsilateral. Subsequent experiments employed anaesthetized rats; kainate was microinfused into tegmental sites in order to stimulate local cholinergic perikarya, and concurrently, extracellular recordings were made of single dopaminergic neurons in the substantia nigra. Consistent with our anatomical findings, unilateral microinfusion of kainic acid in or near the pedunculopontine nucleus increased the firing rate of dopaminergic neurons situated remotely in the ipsilateral substantia nigra. The kainate-induced excitation of nigral dopaminergic neurons was dose-related and was prevented by intravenous administration of the centrally-acting nicotinic cholinergic antagonist mecamylamine. These results suggest that cholinergic perikarya in the vicinity of the pedunculopontine tegmental nucleus innervate dopaminergic neurons in the substantia nigra pars compacta via nicotinic receptors.