During behavioral quiescence, such as slow-wave sleep and anesthesia, the neocortex is in a deactivated state characterized by the presence of slow oscillations. During arousal, slow oscillations are absent and the neocortex is in an activated state that greatly impacts information processing. Neuromodulators acting in neocortex are believed to mediate these state changes, but the mechanisms are poorly understood. We investigated the actions of noradrenergic and cholinergic activation on slow oscillations, cellular excitability, and synaptic inputs in thalamocortical slices of somatosensory cortex. The results show that neuromodulation abolishes slow oscillations, dampens the excitability of principal cells, and rebalances excitatory and inhibitory synaptic inputs in thalamocortical-recipient layers IV-III. Sensory cortex is much more selective about the inputs that can drive it. The source of neuromodulation is critically important in determining this selectivity. Cholinergic activation suppresses the excitatory and inhibitory conductances driven by thalamocortical and intracortical inputs. Noradrenergic activation suppresses the excitatory conductance driven by intracortical inputs but not by thalamocortical inputs and enhances the inhibitory conductance driven by thalamocortical inputs but not by intracortical inputs. Thus noradrenergic activation emphasizes thalamocortical (sensory) inputs relative to intracortical inputs, while cholinergic activation suppresses both.