This study aims to clarify how endogenous release of cortical acetylcholine (ACh) modulates the balance between excitation and inhibition evoked in visual cortex. We show that electrical stimulation in layer 1 produced a significant release of ACh measured intracortically by chemoluminescence and evoked a composite synaptic response recorded intracellularly in layer 5 pyramidal neurons of rat visual cortex. The pharmacological specificity of the ACh neuromodulation was determined from the continuous whole-cell voltage clamp measurement of stimulation-locked changes of the input conductance during the application of cholinergic agonists and antagonists. Blockade of glutamatergic and gamma-aminobutyric acid (GABAergic) receptors suppressed the evoked response, indicating that stimulation-induced release of ACh does not directly activate a cholinergic synaptic conductance in recorded neurons. Comparison of cytisine and mecamylamine effects on nicotinic receptors showed that excitation is enhanced by endogenous evoked release of ACh through the presynaptic activation of alpha(*)beta4 receptors located on glutamatergic fibers. DHbetaE, the selective alpha4beta2 nicotinic receptor antagonist, induced a depression of inhibition. Endogenous ACh could also enhance inhibition by acting directly on GABAergic interneurons, presynaptic to the recorded cell. We conclude that endogenous-released ACh amplifies the dominance of the inhibitory drive and thus decreases the excitability and sensory responsiveness of layer 5 pyramidal neurons.