We tested the hypothesis that fluctuations in the levels of kynurenic acid (KYNA), an endogenous antagonist of the α7 nicotinic acetylcholine (ACh) receptor, modulate extracellular ACh levels in the medial prefrontal cortex in rats. Decreases in cortical KYNA levels were achieved by local perfusion of S-ESBA, a selective inhibitor of the astrocytic enzyme kynurenine aminotransferase II (KAT II), which catalyses the formation of KYNA from its precursor l-kynurenine. At 5 mm, S-ESBA caused a 30% reduction in extracellular KYNA levels, which was accompanied by a two-threefold increase in basal cortical ACh levels. Co-perfusion of KYNA in the endogenous range (100 nm), which by itself tended to reduce basal ACh levels, blocked the ability of S-ESBA to raise extracellular ACh levels. KYNA perfusion (100 nm) also prevented the evoked ACh release caused by d-amphetamine (2.0 mg/kg). This effect was duplicated by the systemic administration of kynurenine (50 mg/kg), which resulted in a significant increase in cortical KYNA formation. Jointly, these data indicate that astrocytes, by producing and releasing KYNA, have the ability to modulate cortical cholinergic neurotransmission under both basal and stimulated conditions. As cortical KYNA levels are elevated in individuals with schizophrenia, and in light of the established role of cortical ACh in executive functions, our findings suggest that drugs capable of attenuating the production of KYNA may be of benefit in the treatment of cognitive deficits in schizophrenia.