In 7-month-old TgCRND8 mice, the extracellular cortical acetylcholine levels in vivo, the number and morphology of cholinergic neurons in the nucleus basalis magnocellularis and the ability to acquire an inhibitory avoidance response in the step-down test were studied. The TgCRND8 mouse brain is characterized by many beta-amyloid plaques, reduced neuronal and axonal staining, white matter demyelination, glia reaction and inducible nitric oxide synthase immunoreactivity. Choline acetyltransferase immunoreactivity in the nucleus basalis magnocellularis was significantly decreased. Basal and potassium-stimulated extracellular acetylcholine levels, investigated by microdialysis, and m2 muscarinic receptor immunoreactivity were reduced in the cortex of TgCRND8 mice, and scopolamine administration increased cortical extracellular acetylcholine levels in control but not in TgCRND8 mice. A cognitive impairment was demonstrated in the step-down test. These findings demonstrate that neuronal damage and cholinergic dysfunction in vivo underlie the impairment in learning and memory functions in this mouse model of Alzheimer's disease.