The olfactory bulb is a second-order brain region that connects sensory neurons with cortical areas. However, the olfactory bulb does not appear to play a simple relay role and is subject instead to extensive local and extrinsic synaptic influences. Prime among the external, or centrifugal, inputs is the dense cholinergic innervation from the basal forebrain, which terminates in both the granule cell and plexiform layers. Cholinergic inputs to the bulb have been implicated in olfactory working memory tasks in rodents and may be related to olfactory deficits reported in people with neurodegenerative disorders that involve basal forebrain neurons. In this study, we use whole-cell recordings from acute rat slices to demonstrate that one function of this input is to potentiate the excitability of GABAergic granule cells and thereby modulate inhibitory drive onto mitral cells. This increase in granule cell excitability is mediated by a concomitant decrease in the normal afterhyperpolarization response and augmentation of an afterdepolarization, both triggered by pirenzepine-sensitive M1 receptors. The afterdepolarization was dependent on elevations in intracellular calcium and appeared to be mediated by a calcium-activated nonselective cation current (I(CAN)). Near firing threshold, depolarizing inputs could evoke quasipersistent firing characterized by irregular discharges that lasted, on average, for 2 min. In addition to regulating the excitability of the primary interneuronal subtype in the bulb, M1 receptors regulate the degree of adaptation that occurs during repetitive sniffing-like inputs and may therefore play a critical role in regulating short-term plasticity in the olfactory system.