Cholinergic neurons of the pedunculopontine nucleus (Ch5) and laterodorsal tegmental nucleus (Ch6) monosynaptically activate dopamine neurons of the substantia nigra, zona compacta (A9), and ventral tegmental area (A10) via muscarinic and nicotinic receptors. Ch5 cells and Ch6 cells are inhibited by local injections of muscarinic agonists, suggesting the presence of autoreceptors. This review advances the hypothesis that the psychotogenic effects of antimuscarinics are triggered by disinhibition of Ch5 and Ch6 cells via their autoreceptors, and that these effects are distinct from the memory-blocking effects of antimuscarinics mediated through the Ch1-Ch4 projections to the forebrain. Neuroleptic and antiparkinson agents with antimuscarinic effects selectively block m1 muscarinic receptors, whereas psychotogenic antimuscarinics are nonselective. In rats, scopolamine injected near Ch5 cells facilitates rewarding brain stimulation and induces locomotion and stereotypy, apparently via activation of dopaminergic systems. Systemically administered scopolamine induces locomotion and stereotypy via muscarinic receptors near Ch5 cells. Ch5 activation and Ch6 activation may be a causal factor in some forms of schizophrenia. Some schizophrenics show early-onset REM sleep, a condition that can result from Ch5 and Ch6 cholinergic activation of the pontine reticular formation. Schizophrenics with early-onset REM, or visual hallucinations, show more severe positive symptoms and negative symptoms. Ch5 cells and Ch6 cells have been found in twice-normal numbers in a few brains of schizophrenics. Several genetic and onset factors for schizophrenia that may be linked to Ch5 cells are considered, as well as treatment strategies based on inhibition of Ch5 cells and Ch6 cells, or blockade of their terminals.