Hippocampus-mediated learning enhances neurogenesis in the adult dentate gyrus (DG), and this process has been suggested to be involved in memory formation. The hippocampus receives abundant cholinergic innervation and acetylcholine (ACh) plays an important role in learning and Alzheimer's disease (AD) pathophysiology. Here, we show that a selective neurotoxic lesion of forebrain cholinergic input with 192 IgG-saporin reduces DG neurogenesis with a concurrent impairment in spatial memory. Conversely, systemic administration of the cholinergic agonist physostigmine increases DG neurogenesis. We find that changes of forebrain ACh levels primarily influence the proliferation and/or the short-term survival rather than the long-term survival or differentiation of the new neurons. We further demonstrate that these newly born cells express the muscarinic receptor subtypes M1 and M4. Our data provide evidence that forebrain ACh promotes neurogenesis, and suggest that the impaired cholinergic function in AD may in part contribute to deficits in learning and memory through reductions in the formation of new hippocampal neurons.