Intracerebral grafts consisting of primary fibroblasts genetically engineered to express NGF were used to assess the regenerative capacity of cholinergic neurons of the adult rat septum. Our data reveal that NGF-producing grafts sustain a significantly higher proportion of NGF receptor-immunoreactive septal neurons following axotomy (approximately 65-75%) than do grafts of noninfected fibroblasts. In addition, NGF promotes the regeneration of septal axons. Following the ablation of cholinergic septal projections to the hippocampus, NGF-producing grafts placed within the lesion cavity contain large numbers of AChE-positive axons; control grafts, on the other hand, lack such cholinergic axons. Ultrastructural examination reveals that unmyelinated axons within NGF-producing grafts use many different substrates for growth, including astrocytes and components of the extracellular matrix. Grafts of control fibroblasts possess the same cellular and matrix substrates but contain only a small population of axons, probably of peripheral origin. AChE-positive axons growing through NGF-producing grafts provide a new topographically organized input to the deafferented hippocampal dentate gyrus. Furthermore, regenerating septal axons terminate predominantly on the dendritic processes of granular neurons. The dentate gyrus ipsilateral to grafts of noninfected fibroblasts, on the other hand, remains devoid of AChE-positive fibers. From these results, we conclude that the availability of NGF is a necessary requirement to sustain axotomized cholinergic septal neurons and to promote axon regeneration and cholinergic reinnervation of dentate granular neurons by these lesioned neurons. The presence of many permissive substrates (e.g., astrocytes, basal lamina, and collagen) alone, however, is not sufficient to induce axon regrowth from adult septal neurons.