Rat neocortical brain slices generated rhythmic extracellular field [microelectroencephalogram (micro-EEG)] oscillations at theta frequencies (3-12 Hz) when exposed to pharmacological conditions that mimicked endogenous ascending cholinergic and GABAergic inputs. Use of the specific receptor agonist and antagonist carbachol and bicuculline revealed that simultaneous muscarinic receptor activation and gamma-aminobutyric acid-A (GABA(A))-mediated disinhibition were necessary to elicit neocortical oscillations. Rhythmic activity was independent of GABA(B) receptor activation, but required intact glutamatergic transmission, evidenced by blockade or disruption of oscillations by 6-cyano-7-nitroquinoxaline-2,3-dione and (+/-)-2-amino-5-phosphonovaleric acid, respectively. Multisite mapping studies showed that oscillations were localized to areas 29d and 18b (Oc2MM) and parts of areas 18a and 17. Peak oscillation amplitudes occurred in layer 2/3, and phase reversals were observed in layers 1 and 5. Current source density analysis revealed large-amplitude current sinks and sources in layers 2/3 and 5, respectively. An initial shift in peak inward current density from layer 1 to layer 2/3 indicated that two processes underlie an initial depolarization followed by oscillatory activity. Laminar transections localized oscillation-generating circuitry to superficial cortical layers and sharp-spike-generating circuitry to deep cortical layers. Whole cell recordings identified three distinct cell types based on response properties during rhythmic micro-EEG activity: oscillation-ON (theta-ON) and -OFF (theta-OFF) neurons, and transiently depolarizing glial cells. Theta-ON neurons displayed membrane potential oscillations that increased in amplitude with hyperpolarization (from -30 to -90 mV). This, taken together with a glutamate antagonist-induced depression of rhythmic micro-EEG activity, indicated that cholinergically driven neocortical oscillations require excitatory synaptic transmission. We conclude that under the appropriate pharmacological conditions, neocortical brain slices were capable of producing localized theta frequency oscillations. Experiments examining oscillation physiology, pharmacology, and topography demonstrated that neocortical brain slice oscillations share many similarities with the in vivo and in vitro theta EEG activity recorded in other brain regions.