There is accumulating evidence that glial cells actively modulate neuronal synaptic transmission. We identified a glia-derived soluble acetylcholine-binding protein (AChBP), which is a naturally occurring analogue of the ligand-binding domains of the nicotinic acetylcholine receptors (nAChRs). Like the nAChRs, it assembles into a homopentamer with ligand-binding characteristics that are typical for a nicotinic receptor; unlike the nAChRs, however, it lacks the domains to form a transmembrane ion channel. Presynaptic release of acetylcholine induces the secretion of AChBP through the glial secretory pathway. We describe a molecular and cellular mechanism by which glial cells release AChBP in the synaptic cleft, and propose a model for how they actively regulate cholinergic transmission between neurons in the central nervous system.