The cholinergic system plays a crucial role in learning and memory. Lesions of cholinergic nuclei, pharmacological manipulations of cholinergic systems, intracerebral transplantation of fetal tissue and anatomical changes in cholinergic pathways during ageing have all been correlated with altered cognitive behaviour. However, it has not been proved that regional acetylcholine is causally required for learning and memory. Here we describe how we achieved a permanent and selective impairment of learning and memory by damaging the nucleus basalis magnocellularis, a nucleus that provides the major cholinergic innervation of the neocortex, in adult rats. To test the hypothesis that acetylcholine is essential for restoration of cognitive function, we implanted genetically modified cells that produce acetylcholine into denervated neocortical target regions. After grafting, rats with increased neocortical acetylcholine levels showed a significant improvement in a spatial navigation task. Acetylcholine is thus not only necessary for learning and memory, as previously argued, but its presence within the neocortex is also sufficient to ameliorate learning deficits and restore memory following damage to the nucleus basalis.