Degeneration of septal neurons in Alzheimer's disease (AD) results in abnormal information processing at cortical circuits and consequent brain dysfunction. The septum modulates the activity of hippocampal and cortical circuits and is crucial to the initiation and occurrence of oscillatory activities such as the hippocampal theta rhythm. Previous studies suggest that amyloid beta peptide (Abeta) accumulation may trigger degeneration in AD. This study evaluates the effects of single injections of Abeta 1-40 into the medial septum. Immunohistochemistry revealed a decrease in septal cholinergic (57%) and glutamatergic (53%) neurons in Abeta 1-40 treated tissue. Additionally, glutamatergic terminals were significantly less in Abeta treated tissue. In contrast, septal GABAergic neurons were spared. Unitary recordings from septal neurons and hippocampal field potentials revealed an approximately 50% increase in firing rates of slow firing septal neurons during theta rhythm and large irregular amplitude (LIA) hippocampal activities and a significantly reduced hippocampal theta rhythm power (49%) in Abeta 1-40 treated tissue. Abeta also markedly reduced the proportion of slow firing septal neurons correlated to the hippocampal theta rhythm by 96%. These results confirm that Abeta alters the anatomy and physiology of the medial septum contributing to septo-hippocampal dysfunction. The Abeta induced injury of septal cholinergic and glutamatergic networks may contribute to an altered hippocampal theta rhythm which may underlie the memory loss typically observed in AD patients.