Cholinergic regulation of hippocampal theta rhythm has been proposed as one of the central mechanisms underlying hippocampal functions including spatial memory encoding. However, cholinergic transmission has been traditionally associated with atropine-sensitive type II hippocampal theta oscillations that occur during alert immobility or in urethane-anesthetized animals. The role of cholinergic regulation of type I theta oscillations in behaving animals is much less clear. Recent studies strongly suggest that both cholinergic muscarinic and nicotinic receptors do actively regulate type I hippocampal theta oscillations and thus provide the cholinergic mechanism for theta-associated hippocampal learning. Septal cholinergic activation can regulate hippocampal circuit and theta expression either through direct septohippocampal cholinergic projections, or through septal glutamatergic and GABAergic neurons, that can precisely entrain hippocampal theta rhythmicity.