Acetylcholine (ACh) is ubiquitously present in the nervous system and has been involved in the regulation of various brain functions. By modulating synaptic transmission and promoting synaptic plasticity, particularly in the hippocampus and cortex, ACh plays a pivotal role in the regulation of learning and memory. These procognitive actions of ACh are mediated by the neuronal muscarinic and nicotinic cholinergic receptors. The impairment of cholinergic transmission leads to cognitive decline associated with aging and dementia. Therefore, the cholinergic system has been of prime focus when concerned with Alzheimer’s disease (AD), the most common cause of dementia. In AD, the extensive destruction of cholinergic neurons occurs by amyloid-β plaques and tau protein-rich neurofibrillary tangles. Amyloid-β also blocks cholinergic receptors and obstructs neuronal signaling. This makes the central cholinergic system an important target for the development of drugs for AD. In fact, centrally acting cholinesterase inhibitors like donepezil and rivastigmine are approved for the treatment of AD, although the outcome is not satisfactory. Therefore, identification of specific subtypes of cholinergic receptors involved in the pathogenesis of AD is essential to develop future drugs. Also, the identification of endogenous rescue mechanisms to the cholinergic system can pave the way for new drug development. In this article, we discussed the neuroanatomy of the central cholinergic system. Further, various subtypes of muscarinic and nicotinic receptors involved in the cognition and pathophysiology of AD are described in detail. The article also reviewed primary neurotransmitters that regulate cognitive processes by modulating basal forebrain cholinergic projection neurons.