Choline acetyltransferase (ChAT), the enzyme synthesizing acetylcholine, is known to be activated by brain derived neurotrophic factor (BDNF). We found that the specific removal of the carbohydrate polysialic acid (PSA) significantly increased BDNF-induced ChAT-activity in embryonic septal neurons. Using a p75 neurotrophin receptor (p75NTR) function-blocking antibody and K252a, a-pan tropomyosin related kinase (Trk) inhibitor, we demonstrate that BDNF-induced ChAT activity requires the stimulation of p75NTR and TrkB. PSA removal drastically increased radioactive iodinated ([125I])BDNF's maximal binding capacity (Bmax), derived from concentrations of [125I]BDNF ranging from 1 pM to 3.2 nM. In the presence of unlabeled nerve growth factor to prevent the binding of [125I]BDNF to p75NTR sites, the impact of PSA removal on the binding capacity of [125I]BDNF was greatly reduced. In conclusion, PSA limits BDNF-induced ChAT activity and BDNF–receptor interactions. BDNF-induced ChAT activity is TrkB and p75NTR dependent, and upon PSA removal the additional binding of BDNF to its receptors, especially p75NTR, likely contributes to the maximal ChAT activity observed. In vivo, the ontogenetic loss of PSA in the postnatal period may allow more interactions between BDNF and its receptors to increase ChAT activity and assure the proper development of the cholinergic septal neurons.