1. The effect of acetylcholine and carbamylcholine on the axon and Schwann cell membrane potential have been studied in the giant nerve fibre of the squid. The addition of carbamylcholine (10(-6)M) to the external sea-water medium has no appreciable effects on the resting and action potentials of the axon. However, it induces a long-lasting hyperpolarization in the surrounding Schwann cells of the unstimulated intact or slit nerve fibres which is completely blocked by D-tubocurarine (10(-9)M). Eserine (10(-9)M) prolongs the Schwann cell hyperpolarizations induced by a 1 min exposure of the unstimulated nerve fibres to acetylcholine (10(-7)M).2. The addition of carbamylcholine (10(-6)M) to the external medium increases the relative permeability of the Schwann cell membrane to the potassium ion in slit nerve fibres. Yet, a hundredfold reduction in external sodium concentration has no appreciable effect on the hyperpolarization of the Schwann cells of the slit nerve fibre under similar conditions.3. Tetrodotoxin at a concentration of 5 x 10(-8)M has no appreciable effects on either the Schwann cell electrical potential or on the hyperpolarizing action of carbamylcholine on the Schwann cells of the unstimulated intact nerve fibres.4. These findings indicate the presence of acetylcholine receptors in the plasma membrane of the Schwann cell in these nerve fibres and give further support to the hypothesis on the role of the cholinergic system in the genesis of the long-lasting Schwann cell hyperpolarizations caused by the conduction of nerve impulse trains by the axon.