Effects of estrogen therapy on cognitive performance appear to diminish with age and time following the loss of ovarian function. We hypothesize that this is due to a reduction in basal forebrain cholinergic function and that treatment with a cholinergic enhancer can reverse the effect. This study tested whether combining the cholinesterase inhibitor donepezil with estradiol treatment can enhance/restore estradiol effects on cognitive performance in young ovariectomized rats with selective lesions of septal cholinergic neurons. 192IgG-saporin was injected directly into the medial septum to produce selective cholinergic lesions. Rats were then treated with donepezil (Don, daily injections of 3mg/kg/day, i.p.) or vehicle, and then with 17β-estradiol (E2, administered by silastic capsule implanted s.c.) or an empty capsule. Rats were trained on a delayed matching-to-position (DMP) T-maze task which previous studies have shown is sensitive to ovariectomy and estrogen replacement. Results show that neither estradiol nor donepezil alone significantly enhanced acquisition of the DMP task in rats with cholinergic lesions. Combination therapy was effective, however, depending on the severity of the lesion. Don+E2 significantly enhanced acquisition of the task in rats with partial lesions (<50% loss of cholinergic neurons), but not in rats with severe lesions. This effect was due largely to a reduction in perseverative behavior. Don+E2 also improved working memory in rats with partial lesions, as evidenced by significantly better performance than controls during increased intertrial delays. These findings suggest that even partial loss of septal cholinergic neurons can reduce effects of estrogen therapy on cognitive performance, and demonstrate that combining a cholinesterase inhibitor with estrogen therapy can help to restore beneficial effects on performance. We propose that combination therapy may have similar beneficial effects in women, particularly in older women who have not used estrogen therapy for many years and are beginning to show signs of cognitive impairment or early Alzheimer's disease.