We hypothesize that selective lesion of the septohippocampal GABAergic neurons suppresses the altered behaviors induced by an N-methyl-D-aspartate (NMDA) receptor antagonist, ketamine or MK-801. In addition, we hypothesize that septohippocampal GABAergic neurons generate an atropine-resistant theta rhythm that coexists with an atropine-sensitive theta rhythm in the hippocampus. Infusion of orexin-saporin (ore-SAP) into the medial septal area decreased parvalbumin-immunoreactive (GABAergic) neurons by ∼80%, without significantly affecting choline-acetyltransferase-immunoreactive (cholinergic) neurons. The theta rhythm during walking, or the immobility-associated theta induced by pilocarpine, was not different between ore-SAP and sham-lesion rats. Walking theta was, however, more disrupted by atropine sulfate in ore-SAP than in sham-lesion rats. MK-801 (0.5 mg/kg i.p.) induced hyperlocomotion associated with an increase in frequency, but not power, of the hippocampal theta in both ore-SAP and sham-lesion rats. However, MK-801 induced an increase in 71–100 Hz gamma waves in sham-lesion but not ore-SAP lesion rats. In sham-lesion rats, MK-801 induced an increase in locomotion and an impairment of prepulse inhibition (PPI), and ketamine (3 mg/kg s.c.) induced a loss of gating of hippocampal auditory evoked potentials. MK-801-induced behavioral hyperlocomotion and PPI impairment, and ketamine-induced auditory gating deficit were reduced in ore-SAP rats as compared to sham-lesion rats. During baseline without drugs, locomotion and auditory gating were not different between ore-SAP and sham-lesion rats, and PPI was slightly but significantly increased in ore-SAP as compared with sham lesion rats. It is concluded that septohippocampal GABAergic neurons are important for the expression of hyperactive and psychotic symptoms an enhanced hippocampal gamma activity induced by ketamine and MK-801, and for generating an atropine-resistant theta. Selective suppression of septohippocampal GABAergic activity is suggested to be an effective treatment of some symptoms of schizophrenia. © 2012 Wiley Periodicals, Inc.