Adolescence has been identified as a vulnerable developmental time period during which exposure to drugs can have long-lasting, detrimental effects. Although adolescent binge-like ethanol (EtOH) exposure leads to a significant reduction in forebrain cholinergic neurons, EtOH's functional effect on acetylcholine (ACh) release during behavior has yet to be examined. Using an adolescent intermittent ethanol exposure model (AIE), rats were exposed to binge-like levels of EtOH from postnatal days (PD) 25 to 55. Three weeks following the final EtOH exposure, cholinergic functioning was assessed during a spontaneous alternation protocol. During maze testing, ACh levels increased in both the hippocampus and prefrontal cortex. However, selectively in the prefrontal cortex, AIE rats displayed reduced levels of behaviorally relevant ACh efflux. We found no treatment differences in spatial exploration, spatial learning, spatial reversal, or novel object recognition. In contrast, AIE rats were impaired during the first attentional set shift on an operant set-shifting task, indicative of an EtOH-mediated deficit in cognitive flexibility. A unique pattern of cholinergic cell loss was observed in the basal forebrain following AIE: Within the medial septum/diagonal band there was a selective loss (30%) of choline acetyltransferase (ChAT)-positive neurons that were nestin negative (ChAT+/nestin-); whereas in the Nucleus basalis of Meynert (NbM) there was a selective reduction (50%) in ChAT+/nestin+. These results indicate that early adolescent binge EtOH exposure leads to a long-lasting frontocortical functional cholinergic deficit, driven by a loss of ChAT+/nestin+ neurons in the NbM, which was associated with impaired cognitive flexibility during adulthood.