The actions of ACh in the medial habenular nucleus (MHb) were investigated using extra- and intracellular recording techniques in guinea pig thalamic slice maintained in vitro. Applications of ACh to MHb neurons resulted in rapid excitation followed by inhibition. Neither of these responses was abolished by blockade of synaptic transmission, indicating that they are consequences of ACh action directly on MHb cells. Local applications of the nicotinic agonists nicotine and cytisine caused long-lasting excitation, while applications of another nicotinic agonist, 1,1-dimethyl-4-phenylpiperazinium caused both the excitatory and inhibitory responses. Applications of the muscarinic agonists DL-muscarine and acetyl-beta-methylcholine did not consistently cause either the excitatory or inhibitory response. Adding the nicotinic antagonist hexamethonium to the bathing medium blocked both the excitatory and inhibitory ACh responses, while addition of the muscarinic antagonists atropine or scopolamine had no effect. These results indicate that the effects of ACh on MHb neurons are mediated by nicotinic receptors. Intracellular recordings revealed that ACh or nicotine cause an increase in membrane conductance associated with depolarizations that had an average reversal potential of -16 to -11 mV. These results indicate that the ACh-induced excitation is due to an increase in membrane cation conductance. The inhibitory response that follows ACh-induced depolarization and repetitive firing was associated with a hyperpolarization and an increase in membrane conductance. Similar postexcitatory inhibition could also be elicited by direct depolarization or by applications of glutamate, indicating that the hyperpolarizing response to ACh may be an endogenous postexcitatory potential that is not directly coupled to activation of nicotinic receptors. These results suggest that cholinergic transmission in the MHb may be largely of the nicotinic type. This nucleus may be of one of the major regions of the nervous system through which nicotine mediates its central effects.