Muscarinic acetylcholine receptors expressed in the central nervous system mediate various functions, including cognition, memory, or reward. Therefore, muscarinic receptors represent potential pharmacological targets for various diseases and conditions, such as Alzheimer’s disease, schizophrenia, addiction, epilepsy, or depression. Muscarinic receptors are allosterically modulated by neurosteroids and steroid hormones at physiologically relevant concentrations. In this review, we focus on the modulation of muscarinic receptors by neurosteroids and steroid hormones in the context of diseases and disorders of the central nervous system. Further, we propose the potential use of neuroactive steroids in the development of pharmacotherapeutics for these diseases and conditions.