Differential actions of acetylcholine on the excitability of two subtypes of interneurons in layer V of the rat visual cortex were examined. Acetylcholine excited low-threshold spike (LTS) cells through nicotinic receptors, whereas it elicited hyperpolarization in fast spiking (FS) cells through muscarinic receptors. Axons of LTS cells were mainly distributed vertically to upper layers, and those of FS cells were primarily confined to layer V. Thus, cortical cholinergic activation may reduce some forms of intralaminar inhibition, promote intracolumnar inhibition, and change the direction of information flow within cortical circuits.