A 25-35% reduction of brain cytochrome oxidase (COx) activity found in Alzheimer's disease (AD) could contribute to neuronal dysfunction and cognitive impairment. The present study replicated the reduction in brain COx activity in rats by administering sodium azide (NaN(3)) for 4 weeks via Alzet minipumps at the rate of 1 mg/kg/h, and determined its effect on hippocampal cholinergic transmission, spatial and episodic memory. NaN(3) caused a selective reduction in choline acetyltransferase (ChAT) immunoreactivity in the diagonal band, a major source of cholinergic input to the hippocampus and cingulate cortex, without altering the number of cholinergic neurons. NaN(3) also induced a significant increase in vesicular acetylcholine transporter (VAChT)-immunoreactive varicosities, GAP-43 in the subgranular layer and of transferrin receptors (TfR) in the hilus of the dentate gyrus. These neurochemical changes were associated with impairment in spatial learning in the Morris water maze and in episodic memory in the object recognition test. Chronic treatment with ladostigil, a novel cholinesterase and monoamine oxidase inhibitor, prevented the decrease in ChAT in the diagonal band, the compensatory increase in synaptic plasticity and TfR and the memory deficits without restoring COx activity. Ladostigil had no significant effect on ChAT activity, synaptic plasticity or TfR in control rats. Ladostigil may have a beneficial effect on cognitive deficits in AD patients that have a reduction in cortical COx activity and cholinergic hypofunction.