Although muscarinic acetylcholine receptors (mAChRs) and NMDA receptors (NMDARs) are important for synaptic plasticity, learning and memory, the manner in which they interact is poorly understood. We found that stimulation of muscarinic receptors, either by an agonist or by the synaptic release of acetylcholine, led to long-term depression (LTD) of NMDAR-mediated synaptic transmission. This form of LTD involved the release of Ca2+ from IP₃-sensitive intracellular stores and was expressed via the internalization of NMDARs. Our results suggest that the molecular mechanism involves a dynamic interaction between the neuronal calcium sensor protein hippocalcin, the clathrin adaptor molecule AP2, the postsynaptic density enriched protein PSD-95 and NMDARs. We propose that hippocalcin binds to the SH3 region of PSD-95 under basal conditions, but it translocates to the plasma membrane on sensing Ca2+; in doing so, it causes PSD-95 to dissociate from NMDARs, permitting AP2 to bind and initiate their dynamin-dependent endocytosis.