To investigate synaptic mechanisms underlying information processing in auditory cortex, we examined cholinergic modulation of synaptic transmission in a novel slice preparation containing thalamocortical and intracortical inputs to mouse auditory cortex. Extracellular and intracellular recordings were made in cortical layer IV while alternately stimulating thalamocortical afferents (via medial geniculate or downstream subcortical stimulation) and intracortical afferents. Either subcortical or intracortical stimulation elicited a fast, 6-cyano-7-nitroquinoxaline-2,3-dione (CNQX)-sensitive, monosynaptic EPSP followed by long-duration, polysynaptic activity. The cholinergic agonist carbachol suppressed each of the synaptic potentials to different degrees. At low concentrations (5 microM) carbachol strongly reduced (>60%) the polysynaptic slow potentials for both pathways but did not affect the monosynaptic fast potentials. At higher doses (10-50 microM), carbachol also reduced the fast potentials, but reduced the intracortically-elicited fast potential significantly more than the thalamocortically-elicited fast potential, which at times was actually enhanced. Atropine (0.5 microM) blocked the effects of carbachol, indicating muscarinic receptor involvement. We conclude that muscarinic modulation can strongly suppress intracortical synaptic activity while exerting less suppression, or actually enhancing, thalamocortical inputs. Such differential actions imply that auditory information processing may favor sensory information relayed through the thalamus over ongoing cortical activity during periods of increased acetylcholine (ACh) release.