Theta oscillations in the limbic system depend on the integrity of the medial septum. The different populations of medial septal neurons (cholinergic and GABAergic) are assumed to affect different aspects of theta oscillations. Using optogenetic stimulation of cholinergic neurons in ChAT-Cre mice, we investigated their effects on hippocampal local field potentials in both anesthetized and behaving mice. Cholinergic stimulation completely blocked sharp wave ripples and strongly suppressed the power of both slow oscillations (0.5–2 Hz in anesthetized, 0.5–4 Hz in behaving animals) and supratheta (6–10 Hz in anesthetized, 10–25 Hz in behaving animals) bands. The same stimulation robustly increased both the power and coherence of theta oscillations (2–6 Hz) in urethane-anesthetized mice. In behaving mice, cholinergic stimulation was less effective in the theta (4–10 Hz) band yet it also increased the ratio of theta/slow oscillation and theta coherence. The effects on gamma oscillations largely mirrored those of theta. These findings show that medial septal cholinergic activation can both enhance theta rhythm and suppress peri-theta frequency bands, allowing theta oscillations to dominate.