Intracellular activity was recorded from dissociated rat hippocampal neurons maintained in tissue culture conditions for 4-6 wk. The cells developed dense interconnections and had typical morphological characteristics similar to hippocampal neurons in situ. The recorded neurons possessed similar electrophysiological properties to those observed in situ or in a slice preparation. Their input resistance (42 M omega), resting membrane potential (-60 mV), membrane time constant (16.2 ms), total electrotonic length (0.92), and spike size (68.3 mV) were similar to values obtained in hippocampal cells in a slice. The connections among adjacent neurons were largely inhibitory. The inhibitory postsynaptic potentials (IPSPs) had longer durations than excitatory postsynaptic potentials (EPSPs) when these were detected. Synaptic delay varied between 0.3 and 3.0 ms. There were no electrotonic connections among neurons. Reciprocal connections were common. Most neurons reacted to acetylcholine (ACh) by an increase in frequency of spontaneous EPSPs, action-potential discharges, and IPSPs. Concurrently, there was a marked reduction in the magnitude of the evoked PSPs tested in pairs of cells. This effect is probably presynaptic to the recorded neurons. A statistical analysis of quantal properties of the synaptic interactions among neurons revealed that ACh causes a reduction of magnitude of PSPs by reducing the number of releasing elements (m). This effect is different from the reduction of evoked PSPs caused by postsynaptic depolarization.