Serving as the ventral, extra-thalamic relay from the brainstem reticular activating system to the cerebral cortex, basal forebrain neurons, including importantly the cholinergic cells therein, are believed to play a significant role in eliciting and maintaining cortical activation during the states of waking and paradoxical sleep. The present study was undertaken in rats to examine the effects upon electroencephalogram (EEG) activity and sleep–wake state of inactivating basal forebrain neurons with microinjections of procaine versus activating them with microinjections of agonists of glutamate, which is the primary neurotransmitter of the brainstem reticular activating system. Microinjections into the basal forebrain were performed using a remotely controlled device in freely moving, naturally sleeping/waking rats during the day when they are asleep the majority of the time. Procaine produced a decrease in gamma (30–60 Hz) and theta (4–8 Hz) EEG activities, and an increase in delta (1–4 Hz) associated with a loss of paradoxical sleep, despite the persistence of slow wave sleep. α-Amino-3-hydroxy-5-methyl-4-isoxazole propionic acid (AMPA) and N-methyl-d-aspartate (NMDA) produced an increase in gamma and a decrease in delta, while eliciting waking. In addition, NMDA, which has been shown in vitro to induce rhythmic bursting in the cholinergic cells, significantly increased theta activity. Following the microinjections of NMDA, c-Fos protein, which has been shown to reflect neural activity, was found in numerous cholinergic, and also GABAergic (γ-aminobutyric acid) and other non-cholinergic neurons, in the substantia innominata and magnocellular preoptic nucleus near the microinjection cannulae. These results substantiate the role of cholinergic, possibly together with other, basal forebrain neurons in cortical activation, including elicitation of gamma and theta activities that underlie cortical arousal during waking and paradoxical sleep.