Neurons in the medial septal/diagonal band complex (MS/DB) in vivo exhibit rhythmic burst-firing activity that is phase-locked with the hippocampal theta rhythm. The aim was to assess the morphology of local axon collaterals of electrophysiologically identified MS/DB neurons using intracellular recording and biocytin injection in vitro. Cells were classified according to previous criteria into slow-firing, fast-spiking, regular-spiking, and burst-firing neurons; previous work has suggested that the slow-firing neurons are cholinergic and that the other types are GABAergic. A novel finding was the existence of two types of burst-firing neuron. Type I burst-firing neurons had significantly longer duration after hyperpolarisation potentials when held at -60 mV, and at -75 mV, type I neurons exhibited a low-threshold spike with more rapid activation and inactivation kinetics than those of type II neurons. We have, also for the first time, described the main features of the local axon collaterals of the five neuron types. All filled neurons possessed a main axon that gave forth 1-12 local primary axon collaterals. All electrophysiological types, except for the type I burst-firing neuron, had a main axon that coursed toward the fornix. Myelination of the main axon was a prominent feature of all but the slow-firing neurons. Branching of the primary axon collaterals of the fast-spiking and type I burst-firing neurons was more extensive than that of the other cell types, with those of the slow-firing neurons exhibiting the least branching. All cell types possessed axon collaterals of the en passant type, and some in addition had twiglike or basketlike axon terminals. All cell types made synapses on distal dendrites; a proportion of the fast-spiking and burst-firing cells in addition had basketlike terminals that made synaptic contacts on proximal dendrites and on somata. Two morphological types of somata were postsynaptic to the basket cells: large (20-30-microm) oval cells with dark cytoplasm, and large oval cells with paler cytoplasm, often with an apical dendrite. The presence of lamellar bodies in the large dark neurons suggests that they may be cholinergic neurons, because previous work has localised these structures in some neurons that stain for choline acetyltransferase. Our work suggests therefore that there may be GABAergic neurons in the MS/DB that form basket synaptic contacts on at least two types of target cell, possibly cholinergic and GABAergic neurons, which means that the basket cells could play a key role in the generation of rhythmic activity in the MS/DB.