Acetylcholine is a central neurotransmitter critical for cognitive function. We show that transient ACh receptor activation generates cell-type specific responses in neocortical neurons. In layer 5 pyramidal neurons, ACh acts via M1 muscarinic receptors,intracellular calcium release, and subsequent SK-type calcium-activated potassium channels to inhibit neuronal output. Pyramidal neurons in layer 3 were generally much less responsive to ACh, but substantial apamin-sensitive inhibitory responses occurred in deep layer 3 neurons of the visual cortex. Fast spiking (FS) nonpyramidal neurons in all cortical areas were non-responsive to ACh, even when exposed to very high agonist concentrations (5 mM). When applied to non-FS interneurons in layers 3 and 5, ACh generated mecamylamine-sensitive nicotinic responses (37% of cells tested), apamin-insensitive hyperpolarizing responses (10% of neurons), or no response at all (53% of cells). Responses in interneurons were similar across cortical layers and regions, but were correlated with cell physiology. Finally, ACh generated nicotinic responses in all layer 1 neurons tested. These data demonstrate that phasic cholinergic input can inhibit projection neurons throughout the cortex while sculpting intracortical processing, especially in superficial layers.