The significance of endoplasmic reticulum (ER) store calcium in modulating transmitter release is slowly gaining recognition. One transmitter system that might play an important role in store calcium modulation of transmitter release in the central nervous system is acetylcholine (ACh). The main olfactory bulb receives rich cholinergic innervation from the horizontal limb of the diagonal band of Broca and blocking cholinergic signaling in the bulb inhibits the ability of animals to discriminate between closely related odors. Here we show that exposing olfactory bulb slices to carbamylcholine (CCh), a hydrolysis-resistant analog of ACh increases GABA release at dendrodendritic synapses on to the mitral cells. This increase in transmitter release is mediated by the activation of M1 class of muscarinic receptors and requires the mobilization of calcium from the ER. The site of action of CCh, for this effect, is developmentally regulated. In animals younger than postnatal day 10, the major action of CCh appears to be on mitral cells, enhancing GABA release via reciprocal signaling resulting from increased glutamate release from mitral cells. In animals older than postnatal day 10, CCh appears to modulate transmitter release from dendrites of the interneurons themselves. Our results point to modulation of inhibition as an important role for cholinergic signaling in the olfactory bulb. Our data also strengthen the emerging idea of a role for store calcium in modulating transmitter release at CNS synapses.