The purpose of this study was to determine whether denervation supersensitivity could be produced in an identified cholinergic pathway in the CNS of the rat. The mechanism for the development of this phenomenon was also explored. Cholinergic denervation of the hippocampus was accomplished by lesions of the medial septum. The response of hippocampal pyramidal cells to microiontophoretic application of acetylcholine (ACh) and carbachol in lesioned and unlesioned animals was determined by extracellular recording. There was a marked increase (6 X) in sensitivity to ACh 2-43 days following lesions. However, there was no increase in sensitivity to carbachol or glutamate. Other workers have shown that septal lesions cause a large decrease in hippocampal acetylcholinesterase (AChE) which is located mainly presynaptically. The absence of increase in sensitivity to carbachol, a cholinomimetic resistant to hydrolysis by AChE, suggests that the postlesion increase in sensitivity to ACh results from a decrease in its inactivation by AChE. A time course for the development of ACh supersensitivity was found to be similar to the time course of AChE loss previosly reported. Experiments using physostigmine, an AChE inhibitor, demonstrated that inhibition of AChE can potentiate the effects of ACh in unlesioned preparations, but not in lesioned preparations. We conclude: (1) denervation supersensitivity to ACh occurs in the septo-hippocampal pathway; and (2) the supersensitivity is probably due to decreased inactivation of ACh by AChE. The results suggest that presynaptic AChE plays a significant role in modulating the neurotransmitter function of ACh in the septo-hippocampal pathway.