1. The effect of cholinergic receptor activation on gamma-aminobutyric acid (GABA)-mediated inhibitory synaptic transmission was investigated in voltage-clamped CA1 pyramidal neurons (HPNs) in the guinea pig hippocampal slice preparation. 2. The cholinergic agonist carbachol (1-10 microM) induced a prominent and sustained increase in the frequency and amplitudes of spontaneous inhibitory postsynaptic currents (IPSCs) in Cl(-)-loaded HPNs. The potentiation of spontaneous IPSCs was not dependent on excitatory synaptic transmission but was blocked by atropine (1 microM). 3. Monosynaptically evoked IPSCs were reversibly depressed by carbachol (10 microM). 4. The frequency of miniature IPSCs recorded in the presence of tetrodotoxin (0.6 or 1.2 microM) was reduced by carbachol (10 or 20 microM) in an atropine-sensitive manner. 5. We conclude that, while cholinergic receptor activation directly excites hippocampal GABAergic interneurons, it has, in addition, a suppressant effect on the synaptic release mechanism at GABAergic terminals. This dual modulatory pattern could explain the suppression of evoked IPSCs despite enhanced spontaneous transmission.