Administration of heroin or phenobarbital to pregnant mice evokes neurochemical and behavioral deficits consequent to disruption of septohippocampal cholinergic innervation. The present study evaluates the relationship between the drug-induced biochemical changes and the behavioral deficits, applying two different approaches: neural grafting and within-individual correlations of biochemistry and behavior. Mice were exposed transplacentally to phenobarbital or heroin on gestational days 9-18 and tested in adulthood. Drug-exposed mice displayed impaired radial arm maze performance, increases in presynaptic choline transporter sites (monitored with [(3)H]hemicholinium-3 binding), upregulation of membrane-associated protein kinase C (PKC) activity, and desensitization of the PKC response to a cholinergic agonist, carbachol. Grafting of cholinergic cells to the impaired hippocampus reversed the behavioral deficits nearly completely and restored basal PKC activity and the PKC response to carbachol to normal; the drug effects on hemicholinium-3 binding were also slightly obtunded by neural grafting, but nevertheless remained significantly elevated. There were significant correlations between the performance in the eight-arm maze and both basal PKC activity and PKC desensitization, and to a lesser extent, between behavioral performance and hemicholinium-3 binding. Taken together, these findings indicate an inextricable link between the biochemical effects of prenatal drug exposure on the PKC signaling cascade and adverse behavioral outcomes. The ability of neural grafting to reverse both the drug-induced changes in PKC and behaviors linked to septohippocampal cholinergic function suggest a mechanistic link between this signaling pathway and neurobehavioral teratology caused by heroin or phenobarbital.