Mood disorders are highly prevalent and are the leading cause of disability worldwide. The neurobiological mechanisms underlying depression remain poorly understood, although theories regarding dysfunction within various neurotransmitter systems have been postulated. Over 50 years ago, clinical studies suggested that increases in central acetylcholine could lead to depressed mood. Evidence has continued to accumulate suggesting that the cholinergic system has a important role in mood regulation. In particular, the finding that the antimuscarinic agent, scopolamine, exerts fast-onset and sustained antidepressant effects in depressed humans has led to a renewal of interest in the cholinergic system as an important player in the neurochemistry of major depression and bipolar disorder. Here, we synthesize current knowledge regarding the modulation of mood by the central cholinergic system, drawing upon studies from human postmortem brain, neuroimaging, and drug challenge investigations, as well as animal model studies. First, we describe an illustrative series of early discoveries which suggest a role for acetylcholine in the pathophysiology of mood disorders. Then, we discuss more recent studies conducted in humans and/or animals which have identified roles for both acetylcholinergic muscarinic and nicotinic receptors in different mood states, and as targets for novel therapies.