Central nervous system dysfunctions (most notably mental retardation and microcephaly) are among the most significant effects of in utero exposure to ethanol. Ethanol has been shown to cause alterations of both neuronal and glial cells, including cell loss, and changes in their migration and maturation. Here, we propose that one of the potential targets for the developmental neurotoxicity of ethanol may be represented by the signal transduction systems activated by cholinergic muscarinic receptors. Ethanol has been shown to inhibit second messenger systems activated by various G-protein-coupled receptors, including certain subtypes of muscarinic receptors. Although the roles of muscarinic receptors in brain development have not been fully elucidated, two potentially relevant effects have been discovered in the past few years. By activating muscarinic receptors coupled to phospholipid metabolism, acetylcholine can induce proliferation of glial cells, and act as a trophic factor in developing neurons by preventing apoptotic cell death. Ethanol has been shown to inhibit both actions of acetylcholine in vitro. These effects of ethanol may lead to a decreased number of glial cells and to a loss of neurons, which have been observed following in vivo alcohol exposure. In turn, these may be the basis of microencephaly and cognitive disturbances in children diagnosed with Fetal Alcohol Syndrome.