Progressive supranuclear palsy (PSP) is a progressive neurodegenerative disease characterized by akinetic-rigid features, falls, a supranuclear gaze palsy and subcortical dementia. Pathologically, there is abnormal accumulation of tau protein. Cholinergic deficits are thought to underlie the postural instability and cognitive impairment of PSP, but trials of cholinergic agonists and cholinesterase inhibitors have failed to show improvement in motor function, quality of life and cognitive impairment. The five cortico-basal ganglia loops, linking functionally related areas of the brain, are damaged in PSP, leading to specific clinical deficits. Cholinergic dysfunction is related to loss of cholinergic interneurons in the striatum, compounded by reduced inputs into the circuits from other cholinergic nuclei, such as the pedunculopontine nucleus and nucleus basalis of Meynert. Normal cholinergic transmission requires the presence of intact cholinergic neurons capable of releasing sufficient acetylcholine, and functional muscarinic and nicotinic receptors. Whilst there is evidence from autopsy and in vivo studies of loss of cholinergic neurons in PSP, the receptor status is unknown. This may be critical to understanding the basis for the poor therapeutic response to cholinomimetics. Symptomatic treatment using cholinergic drugs may thus be improved by more specific targeting of cholinergic receptors or nuclei. There is also evidence that cholinergic agents may have disease-modifying effects. This article reviews the key clinical features of PSP, along with normal basal ganglia anatomy and cholinergic transmission. Cholinergic deficits based on clinical and neurochemical parameters are then discussed, before concluding with suggested future directions for cholinergic treatments.