The nucleus basalis (NB) in the basal forebrain provides most of the cholinergic input to the neocortex and has been implicated in a variety of cognitive functions related to the processing of sensory stimuli. However, the role that cortical acetylcholine release plays in perception remains unclear. Here we show that selective loss of cholinergic NB neurons that project to the cortex reduces the accuracy with which ferrets localize brief sounds and prevents them from adaptively reweighting auditory localization cues in response to chronic occlusion of one ear. Cholinergic input to the cortex was disrupted by making bilateral injections of the immunotoxin ME20.4-SAP into the NB. This produced a substantial loss of both p75 neurotrophin receptor (p75(NTR))-positive and choline acetyltransferase-positive cells in this region and of acetylcholinesterase-positive fibers throughout the auditory cortex. These animals were significantly impaired in their ability to localize short broadband sounds (40-500 ms in duration) in the horizontal plane, with larger cholinergic cell lesions producing greater performance impairments. Although they localized longer sounds with normal accuracy, their response times were significantly longer than controls. Ferrets with cholinergic forebrain lesions were also less able to relearn to localize sound after plugging one ear. In contrast to controls, they exhibited little recovery of localization performance after behavioral training. Together, these results show that cortical cholinergic inputs contribute to the perception of sound source location under normal hearing conditions and play a critical role in allowing the auditory system to adapt to changes in the spatial cues available.