Cortical cholinergic atrophy plays a significant role in the cognitive loss seen with aging and in Alzheimer's disease (AD), but the mechanisms leading to it remain unresolved. Nerve growth factor (NGF) is the neurotrophin responsible for the phenotypic maintenance of basal forebrain cholinergic neurons in the mature and fully differentiated CNS. In consequence, its implication in cholinergic atrophy has been suspected; however, no mechanistic explanation has been provided. We have previously shown that the precursor of NGF (proNGF) is cleaved extracellularly by plasmin to form mature NGF (mNGF) and that mNGF is degraded by matrix metalloproteinase 9. Using cognitive-behavioral tests, Western blotting, and confocal and electron microscopy, this study demonstrates that a pharmacologically induced chronic failure in extracellular NGF maturation leads to a reduction in mNGF levels, proNGF accumulation, cholinergic degeneration, and cognitive impairment in rats. It also shows that inhibiting NGF degradation increases endogenous levels of the mature neurotrophin and increases the density of cortical cholinergic boutons. Together, the data point to a mechanism explaining cholinergic loss in neurodegenerative conditions such as AD and provide a potential therapeutic target for the protection or restoration of this CNS transmitter system in aging and AD.