Muscarinic acetylcholine receptors (mAChRs) are well known to transmit extracellular cholinergic signals into the cytoplasm from their position on the cell surface. However, we show here that M1-mAChRs are also highly expressed on intracellular membranes in neurons of the telencephalon and activate signaling cascades distinct from those of cell surface receptors, contributing uniquely to synaptic plasticity. Radioligand-binding experiments with cell-permeable and -impermeable ligands and immunohistochemical observations revealed intracellular and surface distributions of M1-mAChRs in the hippocampus and cortex of rats, mice, and humans, in contrast to the selective occurrence on the cell surface in other tissues. All intracellular muscarinic-binding sites were abolished in M1-mAChR-gene-knockout mice. Activation of cell surface M1-mAChRs in rat hippocampal neurons evoked phosphatidylinositol hydrolysis and network oscillations at theta rhythm, and transiently enhanced long-term potentiation. On the other hand, activation of intracellular M1-mAChRs phosphorylated extracellular-regulated kinase 1/2 and gradually enhanced long-term potentiation. Our data thus demonstrate that M1-mAChRs function at both surface and intracellular sites in telencephalon neurons including the hippocampus, suggesting a new mode of cholinergic transmission in the central nervous system.