The transmission of visual information from retina to cortex through the dorsal lateral geniculate nucleus (LGNd) is controlled by non-retinal inputs. Enhanced visually evoked responses in cat LGNd relay cells during periods of increased alertness have been attributed in large part to increased rate of acetylcholine (ACh) release by fibres ascending from the brainstem reticular formation. ACh can modulate geniculate visual responses in vivo, but comparatively little is known about the underlying ionic mechanisms of these cholinergic actions. Although direct excitation of LGNd relay neurons has been shown in vitro, the situation is complicated because cholinergic axons form numerous and complex synapses not only with relay cells, but also with inhibitory interneurons, and electrical activation of the brainstem cholinergic neurons reduces inhibitory postsynaptic potentials in the LGNd. We report here that morphologically characterized interneurons in the cat LGNd possess distinctive electrophysiological properties in comparison with those of relay cells and are inhibited by ACh through a muscarinic receptor-mediated increase in potassium conductance. Together the direct excitation of relay cells and inhibition of intrageniculate interneurons allow the ascending cholinergic system to exert a powerful facilitatory influence over the transfer of visual information to the cerebral cortex.