We previously reported that the P1 or P50 midlatency evoked potential underwent decreased habituation or disinhibition in patients with Parkinson's Disease. This sleep state-dependent response appears to be generated by cholinergic elements of the reticular activating system. We attempted to determine if the decreased habituation or disinhibition of the P1 potential would be altered by bilateral pallidotomy. Twenty-three patients who met inclusion criteria for surgery underwent pre- and post-operative evaluation using a Modified United Parkinson's Disease Rating Scale (UPDRS) and P1 potential recordings. Decreased habituation of the P1 potential was determined using a paired stimulus paradigm in which click stimuli were presented at 250, 500 and 1000 msec interstimulus intervals (ISI). Pre-operatively, patients showed disinhibition of the P1 potential at the 250 msec ISI (60 37% vs. 21 20%) and 500 msec ISI (78 47% vs. 43 31%) compared to age-matched control subjects. Post-operatively, the same patients showed a significant improvement in habituation of the P1 potential at the same ISIs (250 msec 37 21%; 500 msec 43 32%). UPDRS scores for these patients pre-operatively were 59 18 and 24 11 post-operatively, resulting in a significant reduction in symptom severity. We conclude that bilateral pallidotomy resulted in a significant improvement in symptom ratings and reduced the disinhibition of the P1 midlatency evoked response.