M 1 muscarinic acetylcholine receptors (mAChRs) may represent a viable target for treatment of disorders involving impaired cognitive function. However, a major limitation to testing this hypothesis has been a lack of highly selective ligands for individual mAChR subtypes. We now report the rigorous molecular characterization of a novel compound, benzylquinolone carboxylic acid (BQCA), which acts as a potent, highly selective positive allosteric modulator (PAM) of the rat M 1 receptor. This compound does not directly activate the receptor, but acts at an allosteric site to increase functional responses to orthosteric agonists. Radioligand binding studies revealed that BQCA increases M 1 receptor affinity for acetylcholine. We found that activation of the M 1 receptor by BQCA induces a robust inward current and increases spontaneous EPSCs in medial prefrontal cortex (mPFC) pyramidal cells, effects which are absent in acute slices from M 1 receptor knock-out mice. Furthermore, to determine the effect of BQCA on intact and functioning brain circuits, multiple single-unit recordings were obtained from the mPFC of rats that showed BQCA increases firing of mPFC pyramidal cells in vivo. BQCA also restored discrimination reversal learning in a transgenic mouse model of Alzheimer's disease and was found to regulate non-amyloidogenic APP processing in vitro, suggesting that M 1 receptor PAMs have the potential to provide both symptomatic and disease modifying effects in Alzheimer's disease patients. Together, these studies provide compelling evidence that M 1 receptor activation induces a dramatic excitation of PFC neurons and suggest that selectively activating the M 1 mAChR subtype may ameliorate impairments in cognitive function.