It is known that acetylcholine can stimulate activation and promote plasticity in the cerebral cortex, yet it is not known how the cholinergic basal forebrain neurons, which release acetylcholine in the cortex, discharge in relation to natural cortical activity and sleep-wake states. By recording basal forebrain units in association with electroencephalographic activity across the sleep-wake cycle and labeling individual neurons with Neurobiotin for immunohistochemical identification, we show for the first time that cholinergic neurons discharge in bursts at maximal rates during active waking and paradoxical sleep, when gamma and theta electroencephalographic activity are maximal. They virtually cease firing during slow-wave sleep. Notably, their bursting discharge is synchronized with theta oscillations. Through their maximal firing and rhythmic theta discharge during active waking and paradoxical sleep, the cholinergic neurons can thus modulate the cortex to promote activation along with plasticity during these two states.