The forebrain cholinergic system promotes higher brain function in part by signaling through the M1 muscarinic acetylcholine receptor (mAChR). During Alzheimer's disease (AD), these cholinergic neurons degenerate, therefore selectively activating M1 receptors could improve cognitive function in these patients while avoiding unwanted peripheral responses associated with non-selective muscarinic agonists. We describe here benzyl quinolone carboxylic acid (BQCA), a highly selective allosteric potentiator of the M1 mAChR. BQCA reduces the concentration of ACh required to activate M1 up to 129-fold with an inflection point value of 845 nM. No potentiation, agonism, or antagonism activity on other mAChRs is observed up to 100 μM. Furthermore studies in M1−/− mice demonstrates that BQCA requires M1 to promote inositol phosphate turnover in primary neurons and to increase c-fos and arc RNA expression and ERK phosphorylation in the brain. Radioligand-binding assays, molecular modeling, and site-directed mutagenesis experiments indicate that BQCA acts at an allosteric site involving residues Y179 and W400. BQCA reverses scopolamine-induced memory deficits in contextual fear conditioning, increases blood flow to the cerebral cortex, and increases wakefulness while reducing delta sleep. In contrast to M1 allosteric agonists, which do not improve memory in scopolamine-challenged mice in contextual fear conditioning, BQCA induces β-arrestin recruitment to M1, suggesting a role for this signal transduction mechanism in the cholinergic modulation of memory. In summary, BQCA exploits an allosteric potentiation mechanism to provide selectivity for the M1 receptor and represents a promising therapeutic strategy for cognitive disorders.