The neurotransmitter acetylcholine, derived from themedial septum/diagonal band of Broca complex,has been accorded an important role in hippocampallearning and memory processes. However, the precise mechanisms whereby acetylcholine released from septohippocampal cholinergic neurons acts tomodulate hippocampal microcircuits remain unknown. Here, we show that acetylcholine release from cholinergic septohippocampal projections causes a long-lasting GABAergic inhibition of hippocampal dentate granule cells invivo and invitro. This inhibition is caused by cholinergic activation of hilar astrocytes, which provide glutamatergic excitation of hilar inhibitory interneurons. These results demonstrate that acetylcholine release can cause slow inhibition of principal neuronal activity via astrocyte intermediaries.